MCT & MNACT Merger: Interview with MNACT’s CEO (Part 2: Exclusive Insights)

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Back in Part 1, I had the opportunity to speak to Mapletree Commercial Trust’s CEO, Ms Sharon Lim, about questions regarding the merger. This is Part 2 of the interviews with both CEOs of MCT & MNACT, regarding the proposed merger. In Part 2, I speak to MNACT CEO, Ms Cindy Chow, regarding the latest FY21/22 results and regarding the merger with MCT.

 

Resources


Mapletree Commercial Trust

Mapletree North Asia Commercial Trust

 

FY21/22 Results


Based on the latest update, Gateway Plaza has -24% average rental reversion whereas The Pinnacle Gangnam has +44% average rental reversion. What are the reasons for such performance, are there structural changes on the underlying environment? Would this trend continue into the next few quarters, and how does it affect the DPU?

Gateway Plaza

  • In Beijing1, new supply in the central business district (“CBD”) with more affordable rental rates as well as relocations of tenants to decentralised office areas (such as Wangjing) to achieve cost savings, have resulted in rental declines in office districts such as Lufthansa.  Gateway Plaza is an office building located in Lufthansa, a well-established commercial hub in Beijing.
  • The MNACT Manager had, and continues to prioritise high occupancy level at Gateway Plaza, to minimise downtime and ensure cash flow stability. As a result, occupancy rate improved from 92.9% as at 31 March 2021 to 94.3% as at 31 March 2022. However, rental rates were lower and an average rental reversion of negative 24% was recorded for FY21/22.
  • Looking ahead1, rents for Beijing office districts, such as Lufthansa, which are nearer to the CBD, are expected to remain stable in the near-term. Based on market views, rents are likely to rise in late 2022 or early 2023.
  • In line with Beijing’s opening up of the services industry, tenants from these business services segments, in addition to the technology, media and telecommunications, as well as financial services and media sectors, are expected to form the bulk of leasing demand at Lufthansa and benefit Gateway Plaza1. In the second half of FY21/22, Gateway Plaza has also attracted new tenants from the environmental consulting and waste recycling sectors.
  • Occupancy rate at Gateway Plaza is expected to remain high, with active marketing and leasing of office space.

     The Pinnacle Gangnam

  • South Korea’s Grade A office market1 has shown strong growth in 2021 despite the uncertainty caused by COVID-19, and benefits from attractive market dynamics including built-in rental escalations. Vacancy rates decreased in all major districts, including the strong performing submarket of Gangnam Business District (“GBD”), supported by high-growth tech companies that are still performing well despite COVID-191.
  • The Pinnacle Gangnam is an office building located in GBD, Seoul. Consequently, The Pinnacle Gangnam has achieved a positive rental reversion of 44% in FY21/22, coupled with a high occupancy rate of 97.3% as at 31 March 2022.
  • For the Seoul office market2, with limited supply, on-going demand for office spaces due to the expansion of technology and pharmaceutical companies is expected to persist for the next few years. The Pinnacle Gangnam is in a good position to benefit from the strong leasing demand from these high-growth sectors, and to deliver organic growth through the high proportion of leases with built-in rental escalation during the lease term.

Notes:

  1. Source: Colliers International (Hong Kong) Limited, 30 March 2022 (link)
  2. Source: Colliers, Seoul Quarterly, 21 January 2022 (link)

Update on China, Japan and Korea Properties (FY21/22 Results: Presentation)
     

Is there any Plan B (if the Merger does not go through) for MNACT?


  • Should the Merger not go through, MNACT will return to business as usual, remaining focused on safeguarding the long-term value for unitholders through proactive asset management, effective cost control and prudent capital management. At the same time, we will continue to source for yield accretive acquisitions to achieve greater diversification and growth of MNACT. MNACT has demonstrated its capabilities in driving inorganic growth through acquisitions of high quality properties spanning across multiple North Asian markets; including expanding beyond its IPO geographies and successfully acquiring nine office properties in Greater Tokyo (2018, 2020 and 2021) and one office property in Seoul (2020).

MNACT will return to business as usual, remaining focused on safeguarding the long-term value for unitholders through proactive asset management, effective cost control and prudent capital management.

  • The Merger, on the other hand, will harness and combine the respective strengths of both REITs to create a more resilient and diversified platform. Over the years, we have been focused on growing and enhancing the resilience of MNACT’s portfolio through accretive acquisitions that provide both geographical and income diversification. The Merged Entity, MPACT, will have an even higher financial capability and flexibility to pursue value-creating acquisitions and fast-track its growth trajectory. We remain confident in the merits of the Merger and the exciting future ahead.
Enlarged Portfolio of post-merger Mapletree Pan Asia Commercial Trust
 

What are your priorities for the next 1-2 year post Merger? How do you split the work with Ms Sharon Lim?


  • As announced on 21 March 2022, it is intended that Ms. Lim Hwee Li Sharon who currently holds the positions of Chief Executive Officer and Executive Director in the MCT Manager, will retain these positions in the manager of the Merged Entity following the completion of the Merger. On or about the completion of the Merger, it is intended that the MNACT Manager will retire as the manager of MNACT and the MCT Manager will be appointed as the manager of the Merged Entity.
  • Following the Merger, the MCT Manager intends to implement its proactive and tailored “4R” asset and capital management strategy to realise the benefits from the Merger. For more details on the “4R” asset and capital management strategy, you may refer to Paragraph 4.2 in Appendix B – Offeror’s Letter to MNACT Unitholders of the Scheme Document (link).
“4R” Asset and Capital Management Strategy

Part 1 (Interview with MCT CEO, Ms Sharon Lim) can be read here.

 
Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement
 
You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement
Continue ReadingMCT & MNACT Merger: Interview with MNACT’s CEO (Part 2: Exclusive Insights)

MCT & MNACT Merger: Interview with MCT’s CEO (Part 1: Exclusive Insights)

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As we know, MCT and MNACT has proposed a merger. Many of you have had questions regarding this merger, and as such, I had the opportunity to speak to Mapletree Commercial Trust’s CEO, Ms Sharon Lim, questions you may have regarding the merger. This is Part 1 of a 2-part series (Read here), in Part 2 I interview MNACT CEO, Ms Cindy Chow, regarding post-results and the merger with MCT.

 

 

Resources


Mapletree Commercial Trust

Mapletree North Asia Commercial Trust

 

Is there any Plan B for MCT if the merger with MNACT does not go through?


It will be business as usual for MCT and we will continue to adhere to our existing investment mandate by focusing on quality commercial assets in Singapore that are value accretive for MCT Unitholders.

We actively explore acquisition opportunities, including third party assets, on an on-going basis. However, opportunities for growth are limited if we remain confined to Singapore. Unitholders have provided as a point of feedback over the years that growth is a priority. We have explored and tried to pursue opportunities in Singapore but good ones that are value accretive are limited. Having reviewed MCT’s growth trajectory, we believe that overseas expansion is inevitable with Asia being a natural place to expand into given our common background and familiarity in the region. MNACT presents itself as a ready platform with footholds in key gateway cities of Asia which will be a springboard for future growth.

Opportunities for growth are limited if we remain confined to Singapore. We have explored and tried to pursue opportunities in Singapore but good ones that are value accretive are limited.

This Merger provides a clear pathway for growth and provides MCT Unitholders with DPU and NAV accretion on a historical pro-forma basis and access to attractive footholds into North Asia, supported by established local operating teams with extensive experience and track record. Growth and expansion in Pan Asia is therefore much easier as opposed to buying individual assets and trying to build an operational team from scratch.

The MCT Manager and the MNACT Manager believe that the Merger will be transformative, and upon completion, will create a flagship commercial REIT in Asia with stability and scale across key Asian gateway markets. The Merged Entity combines the best qualities of both MCT and MNACT – (i) strength, driven by MCT, one of the largest Singapore-focused commercial REITs with longstanding track record in delivering stable returns to unitholders, and (ii) growth potential, driven by MNACT, the first and only North Asia focused REIT listed in Singapore with properties in key gateway markets including China, Hong Kong SAR, Japan and South Korea.

The Merged Entity will comprise a diversified and high-quality portfolio, with a broadened investment mandate to invest in income-producing real estate used primarily for office and/or retail purposes, with an expanded geographic scope to key gateway markets of Asia.

     

What are your priorities for the next 1-2 years post-Merger? How will you split the work with Ms Cindy Chow? (CEO of MNACT)


We have envisaged our “4R” Asset and Capital Management Strategy to be implemented post-Merger. These have been developed with the goal of providing unitholders of the Merged Entity with a relatively attractive rate of return on their investment through regular and steady distributions, and to achieve long-term stability in DPU and NAV per unit, while maintaining an appropriate capital structure for the Merged Entity.

The following summarises the key tenets of our “4R” Asset and Capital Management Strategy:

  • Recharge – Driving NPI and DPU growth by incorporating best practices across the Merged Entity’s portfolio to maximise operational performance.
  • Reconstitute – Optimising the Merged Entity’s portfolio by pursuing selective strategic divestments at an opportune time and redeploying capital into value accretive opportunities.
  • Refocus – Pursue accretive strategic acquisitions and participate in strategic developments whilst leveraging on the local market expertise of the Merged Entity’s on the ground teams and the Sponsor’s strong Asia network and extensive pipeline.
  • Resilience – Adopt a comprehensive capital management strategy to maintain a strong balance sheet, maximise liquidity and minimize risk.

(Unitholders should refer to Section 4.2 of the Unitholders’ Circular for an in-depth view on the Merged Entity’s post-Merger strategy.)

It is intended that Ms. Sharon Lim will retain her position as Chief Executive Officer and Executive Director in the manager of the Merged Entity following the completion of the Merger and continue to lead the MCT Manager. For further details on MPACT’s leadership team, please refer to future SGXNet announcements by the MCT Manager.

 

Assuming the merger with MNACT is successful, please share some insights on:


  1. Where are the synergies to improve the top line and bottom line?
  2. At first glance, I don’t see any synergy in terms of the portfolio as the the properties are at different locations whereby the tenants base are different, lease management, property management and regulatory environment are different. Please share some insights how MPACT is going to manage this?

     

Following the Merger, our immediate priorities will be the combination of management teams, leveraging on the strong local expertise and on-the-ground presence of MNACT. The MNACT team’s on-the-ground experience in relation to its strong capabilities in asset and property management and their established network will be invaluable and necessary for the execution of our post-merger strategy.

Operational synergies can be realised through the implementation of best practices across the enlarged platform and the integration and cross-pollination of the MCT and MNACT teams across core functions and geographies. With access to both tenants of MCT and MNACT, the Merged Entity will have the ability to provide choice locations for tenants across Singapore and other parts of North Asia.

 

 

 

Operational synergies can be realised through the implementation of best practices across the enlarged platform and the integration and cross-pollination of the MCT and MNACT teams across core functions and geographies.

 

Post-Merger, the enlarged platform will be better positioned to unlock upside potential. For instance, the enhanced financial flexibility will enable the Merged Entity to pursue more growth opportunities such as larger acquisitions, capital recycling opportunities, The Merged Entity will also have a bigger debt headroom to undertake asset enhancement and development initiatives. 

MPACT will also be able to leverage on the domain expertise of the Sponsor to pursue active asset management and enhancement and capture accretive investment opportunities more proactively

 

3. Please share how much time MPACT needs to streamline the business operations post-Merger?

 

We value our people and the diverse experiences that come with them. As mentioned earlier, we will focus on realising the benefits of the enlarged platform through the integration and cross-pollination of legacy MCT and MNACT teams across core functions and geographies.

Rather than streamlining, we will seek to harness valuable intellectual capital and best practices that can be implemented across the enlarged platform to capture efficiencies, enhance portfolio optimisation and capitalise on market recovery trends to drive NPI and DPU growth.

We expect that any integration to be seamless as both managers are part of the Mapletree Group with a shared culture and operational procedures.

 

4. Which segments/ cities does MPACT have in mind for portfolio expansion? What is the estimated timeline?

 

The Merged Entity’s enlarged portfolio consists of 18 commercial properties spanning five Asia gateway markets, including Singapore, China, Hong Kong SAR, Japan and South Korea. Singapore will continue to provide core and stability to the portfolio through this phase of growth.

 
Enlarged Portfolio of post-merger Mapletree Pan Asia Commercial Trust

 

We aim to expand the Merged Entity’s AUM by pursuing a primarily acquisitive growth strategy within its existing markets, and leveraging its enlarged balance sheet to focus on opportunities within key gateway cities that can drive growth in NPI and DPU.

Particular areas of interest for us are office and office-like business park assets, anchored by tenants in high growth sectors including tech-enabled and biomedical tenants.

Part 2 (Interview with MNACT CEO, Ms Cindy Chow) can be read here.

 

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement
 
You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement
Continue ReadingMCT & MNACT Merger: Interview with MCT’s CEO (Part 1: Exclusive Insights)

Singapore REIT Monthly Update (May 1st 2022)

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Technical Analysis of FTSE ST REIT Index (FSTAS351020)


FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) decreased from 864.41 to 853.56 (-1.25%) compared to last month’s update. The Singapore REIT index reached a high of 873 on April 5th, before falling into the 850-862 range since April 7th, staying in that range ever since.

  • Support Lines: Blue
  • Resistance Lines: Red
  • Short-term direction: Sideways
  • Medium-term direction: Sideways
  • Long-term direction: Sideways
  • Immediate Support at 850, followed by 807.
  • Immediate Resistance at 862, followed by 890

 

Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on April 3rd, 2022.

 

Fundamental Analysis of 40 Singapore REITs


The following is the compilation of 40 Singapore REITs with colour-coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio.

  • The Financial Ratios are based on past data and there are lagging indicators.
  • This REIT table takes into account the dividend cuts due to the COVID-19 outbreak. Yield is calculated trailing twelve months (ttm), therefore REITs with delayed payouts might have lower displayed yields, thus yield displayed might be lower for more affected REITs.
  • Many REITs have been updated with the latest Q1 2022 business updates/earnings, while REITs that have yet to release business updates/earnings are still using Q4 2021 data.
  • Digital Core REIT’s yield is extracted from the IPO Prospectus, calculated based on *Estimated DPU (calculated from the Prospectus) / Current Price.

Data from StocksCafe REIT Screener. https://stocks.cafe/kenny/advanced

 

What does each Column mean?

  • FY DPU: If Green, FY DPU for the recent 4 Quarters is higher than that of the preceding 4 Quarters. If Lower, it is Red.
    • Most REITs are green since it is compared to FY20/21 as the base (during the pandemic)
  • Yield (ttm): Yield, calculated by DPU (trailing twelve months) and Current Price as of April 29th, 2022
    • Digital Core REIT: Yield calculated from IPO Prospectus.
  • Gearing (%): Leverage Ratio.
  • Price/NAV: Price to Book Value. Formula: Current Price (as of April 2nd, 2022) over Net Asset Value per Unit.
  • Yield Spread (%): REIT yield (ttm) reference to Gov Bond Yields. REITs trading in USD is referenced to US Gov Bond Yield, everything else is referenced to SG Gov Bond Yield.
  •  

Price/NAV Ratios Overview

  • Price/NAV decreased to 0.99.
    • Decreased from 1.00 from April 2022.
    • Singapore Overall REIT sector is at fair value now.
    • Take note that NAV is adjusted downward for most REITs due to drop in rental income during the pandemic (Property valuation is done using DCF model or comparative model)
  • Most overvalued REITs (based on Price/NAV)
    • Parkway Life REIT (Price/NAV = 2.06)
    • Keppel DC REIT (Price/NAV = 1.56)
    • Mapletree Industrial Trust (Price/NAV = 1.41)
    • ARA LOGOS Logistics Trust (Price/NAV = 1.27)
    • Mapletree Logistics Trust (Price/NAV = 1.20)
    • Ascendas REIT (Price/NAV = 1.20)
    • No change to the Top 3 compared to March and April updates.
  • Most undervalued REITs (based on Price/NAV)
    • BHG Retail REIT (Price/NAV = 0.60)
    • Lippo Malls Indonesia Retail Trust (Price/NAV = 0.61)
    • EC World REIT (Price/NAV = 0.70)
    • ARA US Hospitality Trust (Price/NAV = 0.72)
    • OUE Commercial REIT (Price/NAV = 0.74)
    • Starhill Global REIT (Price/NAV = 0.74)

Distribution Yields Overview

  • TTM Distribution Yield increased to 6.00%.
    • Increased from 5.86% in April 2022.
    • 14 of 40 Singapore REITs have distribution yields of above 7%. (Same as last month’s update)
    • Do take note that these yield numbers are based on current prices taking into account the delayed distribution/dividend cuts due to COVID-19, and economic recovery. 
  • Highest Distribution Yield REITs (ttm)
    • United Hampshire REIT (9.76%)
    • EC World REIT (9.64%)
    • Prime US REIT (9.10%)
    • Keppel Pacific Oak REIT (8.63%)
    • Manulife US REIT (8.53%)
    • Sasseur REIT (8.51%)
    • Reminder that these yield numbers are based on current prices taking into account delayed distribution/dividend cuts due to COVID-19.
    • Some REITs opted for semi-annual reporting and thus no quarterly DPU was announced.
    • A High Yield should not be the sole ratio to look for when choosing a REIT to invest in.
  • Yield Spread decreased to 3.44%.
    • Decreased from 3.49% in April 2022.

Gearing Ratios Overview

  • Gearing Ratio remained similar at 37.05%. 
    • Changed from 37.03% in April 2022.
    • Gearing Ratios are updated quarterly. (Those with Q1 2022 updates have updated gearing ratios)
    • In general, Singapore REITs sector gearing ratio is healthy but increased due to the reduction of the valuation of portfolios and an increase in borrowing due to Covid-19.
  • Highest Gearing Ratio REITs
    • ARA Hospitality Trust (44.3%)
    • Suntec REIT (43.3%)
    • Lippo Malls Indonesia Retail Trust (42.9%)
    • Manulife US REIT (42.8%)
    • Elite Commercial REIT (42.4%)
    • Frasers Hospitality Trust (42.3%)
    • No change to the Top 3 compared to April update.

Market Capitalisation Overview

  • Total Singapore REIT Market Capitalisation increased slightly by 0.32% to S$112.25 Billion.
    • Increased from S$111.89 Billion in April 2022.
  • Biggest Market Capitalisation REITs:
    • Capitaland Integrated Commercial Trust ($15.40B)
    • Ascendas REIT ($12.01B)
    • Mapletree Logistics Trust ($8.36B)
    • Mapletree Industrial Trust ($6.94B)
    • Mapletree Commercial Trust ($6.21B)
    • Frasers Logistics & Commercial Trust ($5.34B)
    • No change in Top 5 rankings since August 2021.
  • Smallest Market Capitalisation REITs:
    • BHG Retail REIT ($281M)
    • ARA US Hospitality Trust ($402M)
    • Lippo Malls Indonesia Retail Trust ($460M)
    • United Hampshire REIT ($479M)
    • Sabana REIT ($486M)
    • First REIT ($508M)
    • No change in Top 4 rankings compared to March and April updates.

Disclaimer: The above table is best used for “screening and shortlisting only”. It is NOT for investing (Buy / Sell) decision. If you want to know more about investing in REITs, here’s a subsidised 2-day course with all you need to know about REITs and how to start investing in them.

Top 20 Worst Performers of the Month in April 2022


 (Source: https://stocks.cafe/kenny/advanced)

SG 10 Year & US 10 Year Government Bond Yield

  • SG 10 Year: 2.52% (increased from 2.37%)
  • US 10 Year: 2.87% (increased from 2.39%)

Major REIT News in April 2022


S-REITs Earnings Season for the Period Ending 31 Mar 2022 is well underway

A total of 22 S-REITs have released their earnings/business updates (as of April 29th 2022) for the Period Ending 31 Mar 2022 (28 Feb 2022 for SPH Reit), with the remainder set to do so through end-May.

Upcoming S-Reits’ earnings releases’ schedule

THE BUSINESS TIMES: SPH REIT : SK6U 0% kicked off the current financial reporting season for S-Reits on Apr 1,l 2022 with with the release of its H1 FY2022 (ended Feb 28, 2022) financial results. This was followed by other S-Reits, including Keppel DC Reit : AJBU +0.48% (Q1 business update), Keppel Pacific Oak US Reit : CMOU +0.68% (Q1 business update), Mapletree North Asia Commercial Trust : RW0U 0% (full-year results), Keppel Reit : K71U -1.6% (Q1 business update), Mapletree Commercial Trust : N2IU +1.07% (full-year results), Digital Core Reit : DCRU +5.82% (Q1 business update) and Sabana Industrial Reit (Q1 business update), over a 3-day period from Apr 19 to 21, 2022.  

Another 22 S-Reits have also confirmed that they will unveil financial results or business updates between Apr 22, 2022 and May 12, 2022 for their respective periods ended Mar 31, 2022. Among them, 3 would be reporting full-year financial results, 4 would be reporting first-half or first-quarter financial results, and another 15 would be providing quarterly business updates. Read More

REITs that have yet to release earnings/business updates as of April 29th, 2022:

ARA HTrust USD (XZL), Ascendas Reit (A17U), BHG Retail Reit (BMGU), ARA Logos Log Trust (K2LU), CDL HTrust (J85), CromwellReit EUR (CWBU), EC World Reit (BWCU), Elite Commercial REIT GBP (MXNU), Daiwa House Log Trust (DHLU), Far East HTrust (Q5T), First Reit (AW9U), Frasers Log & Com Tr (BUOU), IREIT Global (UD1U), Lendlease Reit (JYEU), ManulifeReit USD (BTOU), OUE Com Reit (TS0U), Prime US Reit USD (OXMU), Sasseur Reit (CRPU), UtdHampshReitUSD (ODBU).

S-REIT Table at a glance.

REITs Symposium 2022 is happening on 21st May!

REITs Symposium is BACK! This year, it’s a MEGA-Hybrid event, which will take place at Suntec Exhibition Hall on 21 May and broadcasted LIVE simultaneously to online viewers! Do express your interest if you want to participate on-site, spaces are limited! I will be moderating 5 REIT Interviews with CEOs, namely United Hampshire US REIT, BHG REIT, Elite Commercial REIT, Ascott Residence Trust and First REIT.

With optimism of the world re-opening and being on a pedestal of being truly global REIT hub, what does this all mean for S-REIT investors? Will inflationary pressures be overshadowed by re-opening optimism? For this year’s REITs Symposium, join us as we invite the CEOs of selected S-REITs and multiple industry experts, to answer these pertinent questions.

Register Now!


Summary


Fundamentally, the whole Singapore REITs landscape is at fair value based on the average Price/NAV value of the S-REITs. Below is the market cap heat map for the past 1 month. Generally, S-REITs in the past month have decreased in market cap. 

All 5 Hospitality REITs are part of this month’s 11 strongest performers. This can be attributed to the full reopening of Singapore’s borders for vaccinated travelers. 

Capitaland Integrated Commercial Trust (+2.19%)‘s gains can be attributed to the lifting of ‘back to office’ COVID restrictions, and institutional fund inflow. 

Suntec REIT (+4.55%)‘s gains can also be attributed to the lifting of ‘back to office’ COVID restrictions, and the resumption of convention centre events. The coming REIT Symposium 2022 will be held at Suntec Convention Centre on the 21st May! Sign up/View Event Details here.

(Source: https://stocks.cafe/kenny/overview)

Yield spread (in reference to the 10 year Singapore government bond of 2.52% as of 29th April 2022) continued to tighten from 3.49% to 3.44%. The S-REIT Average Yield increased from 5.86% to 6.00%, but the increase in the Government Bond Yields offsets this Average S-REIT Yield increase. The yield of the REITs sector needs to increase to maintain the average yield spread of 4%. Amid all the negative news, S-REITs have been resilient and have one of the highest risk-adjusted dividend yields compared to other stock exchanges.

S-REITs have been resilient and have one of the highest risk-adjusted dividend yields compared to other stock exchanges.

The risk premium has dropped, but still remains attractive (compared to other asset classes) to accumulate Singapore REITs in stages to lock in the current price and to benefit from long-term yield after the recovery, especially since the S-REIT Market is still at a fair value. Moving forward, it is expected that DPU will continue to increase due to the recovery of the global economy, as seen in the previous few earning updates, especially for Hospitality REITs. NAV is expected to be adjusted upward due to revaluation of the portfolio.

You can listen to my monthly REIT radio interview on MoneyFM89.3 here.

Note: This above analysis is for my own personal research and it is NOT a buy or sell recommendation. Investors who would like to leverage my extensive research and years of Singapore REIT investing experience can approach me separately for a REIT Portfolio Consultation.

Kenny Loh is an Associate Wealth Advisory Director  and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingSingapore REIT Monthly Update (May 1st 2022)