Technical Analysis of FTSE ST REIT Index (FSTAS351020)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) decreased slightly from 882.31 to 876.88 (-0.62%) compared to the last month update. Currently the Singapore REIT index is still trading with a range between 816 and 890.

• As for now, Short term direction: Sideway.
• Immediate Support at 816, followed by 775.
• Immediate Resistance at 890.

Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on August 7, 2021.

Fundamental Analysis of 38 Singapore REITs

The following is the compilation of 38 Singapore REITs with colour coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio.

• Note 1: The Financial Ratio are based on past data and there are lagging indicators.
• Note 2: 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 3: All REITs have been updated with Q2 2021 business updates/earnings.

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

• Price/NAV increased to 1.06
  • Increased from 1.05 in August 2021.
  • Singapore Overall REIT sector is slightly overvalued 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 increased to 5.55%
  • Increased from 5.46% in August 2021.
  • 9 of 38 (23.7%) Singapore REITs 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.

• Gearing Ratio decreased from 37.40% 
  • Decreased from 37.50% in August 2021.
  • Gearing Ratios are updated quarterly. Hence there will likely be no change to Gearing Ratio in October’s update.
  • 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.

• Most overvalued REITs (based on Price/NAV)
  • Parkway Life REIT (Price/NAV = 2.47)
  • Keppel DC REIT (Price/NAV = 2.09)
  • Mapletree Industrial Trust (Price/NAV = 1.67)
  • Mapletree Logistics Trust (Price/NAV = 1.58)
  • Ascendas REIT (Price/NAV = 1.37)
  • ARA LOGOS Logistics Trust (Price/NAV = 1.37)
  • Frasers Logistics and Commercial Trust (Price/NAV = 1.34)

• Most undervalued REITs (based on Price/NAV)
  • BHG REIT (Price/NAV = 0.62)
  • Lippo Malls Indonesia Retail Trust (Price/NAV = 0.65)
  • Suntec REIT (Price/NAV = 0.71)
  • OUE Commercial REIT (Price/NAV = 0.75)
  • First REIT (Price/NAV = 0.75)
  • Frasers Hospitality Trust (Price/NAV = 0.77)

• Highest Distribution Yield REITs (ttm)
  • First REIT (11.89%)
  • United Hampshire REIT (8.44%)
  • Sabana REIT (8.38%)
  • Keppel Pacific Oak REIT (8.28%)
  • Prime US REIT (7.94%)
  • Sasseur REIT (7.73%)
  • 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
  • ARA Hospitality Trust (49.0%)
  • Suntec REIT (43.1%)
  • ESR REIT (42.9%)
  • Lippo Malls Retail Trust (42.5%)
  • Elite Commercial REIT (42.1%)
  • Frasers Hospitality Trust (42.1%)
  • Manulife US REIT (42.1%)

• Total Singapore REIT Market Capitalisation decreased to S$109.2 Billion.
  • Decreased from S$111.5 Billion in August 2021.

• Biggest Market Capitalisation REITs:
  • Capitaland Integrated Commercial Trust ($13.53B)
  • Ascendas REIT ($13.00B)
  • Mapletree Logistics Trust ($8.96B)
  • Mapletree Industrial Trust ($7.79B)
  • Mapletree Commercial Trust ($6.90B)
  • No change in Top 5 rankings from August 2021 update.

• Smallest Market Capitalisation REITs:
  • BHG Retail REIT ($281M)
  • ARA Hospitality Trust ($380M)
  • First REIT ($426M)
  • Sabana REIT ($474M)
  • Lippo Malls Indonesia Retail Trust ($476M)
  • All 5 REITs were also the Smallest Market Capitalisation REITs in the March-August 2021 update.

• Eagle Hospitality Trust has been removed

Disclaimer: The above table is best used for “screening and shortlisting only”. It is NOT for investing (Buy / Sell) decision. If you need help to start building your own investment portfolio, or want a portfolio review, book a consultation with Kenny now! First consultation is free. 

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

SG 10 Year & US 10 Year Government Bond Yield

• SG 10 Year: 1.39% (increased from 1.36%)
• US 10 Year: 1.33% (increased from 1.23%)

Retail Investors Sentiment

We did a poll on our telegram channel https://t.me/REITirement and below is the poll result of the retail investors who are interested in Singapore REITs.

• 14% worried about the market crash (bearish)
• 35% wants to accumulate more (bullish)
• 33% waiting for dividend (bullish)
• 12% don’t know what to do
• 6% Other reasons (no bullets (for investment) or don’t even have a trading account?)

In general, two third of the retails investors have a positive view on Singapore REITs. Most analysts and research houses overweight Singapore REITs to perform better in the next 12 months amid the re-opening of borders.

For the 12% who would like to invest in Singapore REITs for passive income but do not know what to do, I would recommend you seek help from your finiancial advisors, your banks, your brokers or attend classes to equip yourself sufficient knowledge so that you can make an informed investment decision. You can book a REIT Portfolio Consultation session with me if you need some advice whether you are moving to the right direction.

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. Unlike last month, where Large Cap REITs are generally better performing, in this update, Medium Market Cap REITs generally are better performing.

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

Yield spread (in reference to the 10 year Singapore government bond of 1.39% as of 4th September 2021) widened slightly from 4.10% to 4.17% . The risk premium is 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, as seen in the previous few earning updates. NAV is expected to be adjusted upward due to revaluation of the portfolio.

Technically the REIT Index is still trading in a sideways consolidation waiting for a breakout (upside bias). Currently the REIT index is testing the resistance zone at 875-890. Breaking this resistance zone will bring the bull back into Singapore REITs sector.  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. In addition, Singapore is entering the 4 Stages Reopening  with high vaccination rates, which also supports the bull case.

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