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.

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