Money and Me: An overview of the REIT performance

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14 Jun 2021 

Money and Me: An overview of the REIT performance


On Money and Me, Michelle Martin is joined by Kenny Loh, REIT Specialist and Independent Financial Advisor to discuss an overview of the REIT performance to date, some of the best performing and worst performing REITs, and City Developments Limited application for an initial public offering of a real estate investment trust with commercial assets located in Britain.

  • Effect of COVID-19 measures relaxing on S-REITs
  • Best and worst performing S-REITs
  • CDL filing for a Singapore REIT IPO on London commercial assets

Listen to his previous market outlook interviews here:

Kenny Loh is a Senior Consultant 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 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 Sympsosium and Invest Fair. 
You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement
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Singapore REIT Monthly Update (June 06 – 2021)

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Technical Analysis of FTSE ST REIT Index (FSTAS351020)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) decreased slightly from 865.91 to 849.11 (-1.94%) compared to the last month update. Currently the Singapore REIT index is still trading with a range between 816 and 874.

  • As for now, Short term direction: Sideway.
  • Immediate Support at 816, followed by 775.
  • Immediate Resistance at 874.

Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on May 4, 2021.

Fundamental Analysis of 39 Singapore REITs

The following is the compilation of 39 Singapore REITs with colour coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio.

  • Note 1: Soilbuild Business Space REIT (SV3U) has been delisted.
  • Note 2: The Financial Ratio are based on past data and there are lagging indicators.
  • Note 3: 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.
  • Note 4: REITs highlighted in blue have been updated with the latest Q1 2021 business updates.

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

Do sign up for the REIT screener at only ~$8.33 per month! (limited time only). Normal price $120 per year.

  • Price/NAV decreased to 1.03
    • Was 1.04 in May 2021.
    • Singapore Overall REIT sector is at about fair value now.
    • Take note that NAV is adjusted downward for most REITs due to drop in rental income (Property valuation is done using DCF model or comparative model)
  • TTM Distribution Yield decreased to 5.32%
    • Decreased from 5.36% in May 2021.
    • 25.6% of Singapore REITs (10 out of 39) have distribution yields of above 7%.
    • 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 post circuit breaker recovery.
    • Excluded Eagle Hospitality Trust due to suspension.
  • Gearing Ratio increased to 37.68%. 
    • Increased from 37.53% in May 2021.
    • Gearing Ratios are updated quarterly.
    • In general, Singapore REITs sector gearing ratio is healthy but started to increase due to the reduction of the valuation of portfolios and increase in borrowing due to Covid-19.
  • Most overvalued REITs (based on Price/NAV)
    • Parkway Life REIT (Price/NAV = 2.22)
    • Keppel DC REIT (Price/NAV = 2.19)
    • Mapletree Industrial Trust (Price/NAV = 1.69)
    • Mapletree Logistics Trust (Price/NAV = 1.53)
    • ARA LOGOS Logistics Trust (Price/NAV = 1.36)
  • Most undervalued REITs (based on Price/NAV)
    • First REIT (Price/NAV = 0.53)
    • Lippo Malls Indonesia Retail Trust (Price/NAV = 0.65)
    • BHG REIT (Price/NAV = 0.66)
    • OUE Commercial REIT (Price/NAV = 0.67)
    • Starhill Global REIT (Price/NAV = 0.68)
    • Suntec REIT (Price/NAV = 0.71)
    • All 6 REITs were also the top 6 undervalued REITs of April and May 2021
  • Highest Distribution Yield REITs (ttm)
    • First REIT (11.09%)
    • Prime US REIT (8.16%)
    • ESR REIT (7.65%)
    • IREIT Global (7.62%)
    • Sasseur REIT (7.54%)
    • Cromwell European REIT (7.46%)
    • 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.
  • Highest Gearing Ratio REITs
    • Eagle Hospitality Trust (65.5%) * Filed for Chapter 11 Bankruptcy Protection *
    • ARA Hospitality Trust (49.0%)
    • Suntec REIT (44.4%)
    • Elite Commercial REIT (42.1%)
    • ESR REIT (42.0%)
    • Lippo Malls Retail Trust (41.7%)
  • Total Singapore REIT Market Capitalisation = S$106.1 Billion.
    • Decreased from S$108.8 Billion in May 2021.
  • Biggest Market Capitalisation REITs:
    • Capitaland Integrated Commercial Trust ($14.18B)
    • Ascendas REIT ($12.38B)
    • Mapletree Logistics Trust ($8.48B)
    • Mapletree Commercial Trust ($7.06B)
    • Mapletree Industrial Trust ($6.65B)
    • No change in ranking compared to March-May 2021 update.
  • Smallest Market Capitalisation REITs:
    • BHG Retail REIT ($284M)
    • United Hamsphire REIT ($327M)
    • ARA Hospitality Trust ($390M)
    • First REIT ($392M)
    • Sabana REIT ($442M)
    • All 5 REITs were also the Smallest Market Capitalisation REITs in the March-May 2021 update.
  • Eagle Hospitality Trust is currently suspended

Disclaimer: The above table is best used for “screening and shortlisting only”. It is NOT for investing (Buy / Sell) decision. To learn how to use the table and make appropriate investment decisions, sign up for the next REIT Investing Workshop here to learn how to choose fundamentally strong Singapore REITs for long-term investing and passive income generation.

Top 20 Performers of the Month (Source: https://stocks.cafe/kenny/advanced)

SG 10 Year & US 10 Year Government Bond Yield

  • SG 10 Year: 1.52%
  • US 10 Year: 1.557%

Summary

Fundamentally, the whole Singapore REITs landscape is slightly overvalued now based on the average Price/NAV value of the S-REITs. Below is the market cap heat map for the past 1 month.

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

Yield spread (in reference to 10 year Singapore government bond of 1.52%) continues to tighten from 3.809% to 3.8%. However, the risk premium is still attractive to accumulate Singapore REITs in stages to lock in the current price and to benefit from long-term yield after the recovery. Moving forward, it is expected that DPU will increase due to the recovery of global economy.

Technically the REIT Index is still trading in a sideways consolidation waiting for a breakout (upside bias). Current macro factors such as a low-interest rate environment, aggressive M&A for future DPU growth, wider roll out of the vaccination and recovery of global economic support the bullish breakout.

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 a Senior Consultant 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

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5 S-REITs whose NAV is on a declining trend

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Disclaimer: This article is based on observations on past trends. It is not a prediction on future events that may happen in the REITs space. Please seek your financial advisor for advice.

According to Investopedia, Net Asset Value is equal to a fund’s or company’s total assets minus liabilities, divided by no. of shares. In other words, NAV = (Assets – Liabilities) / Total number of outstanding shares. NAV is usually calculated by REITs semi-annually or quarterly. Using individual REIT data and data from the StocksCafe REIT screener, below are 5 REITs whose Net Asset Value is on a downtrend since Q1 2015. The below table shows the % Reduction in NAV in 6 years, between Q1 2015 and Q1 2021.

% Change in NAV for the 5 REITs from Q1 2015 to Q1 2021.
 

Below is an overview of the 5 REITs listed above, sorted according to the highest loss in NAV since Q1 2015. An NAV chart is also provided. The charts are taken from the StocksCafe REIT screener.

   

Lippo Malls Indonesia Retail Trust


LMIR NAV chart, taken from the StocksCafe REIT screener.

LMIR Trust comprises 29 Retail properties, wholly in Indonesia, with a total portfolio valuation of S$1,791.5 million. Its NAV decreased from 0.42 in Q1 2015 to 0.10 in Q1 2021. LMIR Trust held a right issue in Q1 2021.

   

Sabana REIT


Sabana REIT NAV chart, taken from the StocksCafe REIT screener.

Sabana REIT comprises 18 industrial properties, wholly in Singapore, with a total portfolio valuation of S$840.1 million. Its NAV decreased from 1.06 in Q1 2015 to 0.51 in Q1 2021. although its NAV remained relatively stable, hovering around 0.55, since Q1 2017.

   

First REIT


First REIT NAV chart, taken from the StocksCafe REIT screener.

First REIT comprises 20 healthcare properties comprising 16 hospitals located in Indonesia, three nursing homes in Singapore, and one hospital in South Korea. Its total portfolio valuation is S$939.7 million. Its NAV remained stable until Q4 2020, where a rights issue was carried out, dropping its NAV to 0.50.

   

OUE Commercial REIT


OUE Commercial REIT NAV chart, taken from the StocksCafe REIT screener.

OUE Commercial REIT’s portfolio comprises seven properties in the Office, Retail and Hospitality sectors, with properties in Singapore and Shanghai, and a total portfolio valuation of S$6,524.8 million. Its NAV decreased from 1.11 in Q1 2015 to 0.58 in Q1 2021.

   

ARA LOGOS Logistics Trust


ARA LOGOS Logistics Trust NAV chart, taken from the StocksCafe REIT screener.

ARA LOGOS Logistics Trust (formerly Cache Logistics Trust) portfolio comprises 31 logistics warehouse properties, with 10 located in Singapore and 21 located in Australia. Its NAV decreased from 0.98 in Q1 2015 to 0.58 in Q1 2021. In Q1 2020, ARA Asset Management completed the acquisition of a majority stake in LOGOS, and Cache Logistics Trust was renamed to its current name.

As there are REITs with a decreasing NAV trend, there are also REITs with an increasing NAV trend for the past 5 years. This is beneficial for us investors, as when NAV increases, so does the share price. An example is Keppel DC REIT.

Keppel DC REIT NAV chart, taken from the StocksCafe REIT screener.

Its NAV increased from 0.87 in Q1 2015 to 1.18 in Q1 2021, an increase of 35.59%. So does its price, which has also seen a large increase from S$0.96 in Q1 2015 (taken 2 Jan 2015) to S$2.58, increasing by 168%.

Keppel DC REIT price chart, taken from Google Finance

There are other REITs that have an increasing NAV trend. You can find other REITs with increasing NAV trends in the StocksCafe REIT screener. Happy hunting!

Kenny Loh is a Senior Consultant 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 an invited speaker of REITs Symposium and Invest Fair. Kenny Loh also offers REIT Portfolio Advisory for a fee. Do contact him at kennyloh@fapl.sg 

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