Technical Analysis of FTSE ST REIT Index (FSTAS8670)
FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) went through the a historical event of Singapore REIT Black Monday Market Crash. You may view the Webinar here if you need to under the WHY it happened. COVID-19 Crash: Risk or Opportunity to hold REIT?
The REIT index has crashed from 941.89 to 698.05 (-25.89%) compared to last month update. The REIT index has dropped from the peak (976.419) and rebounded from 584.384, which translates about 40.12% sell of.
Based on the current chart patter, the REIT index may have found the bottom as Exhaustion Gap (if this is true) is formed after the Breakaway gap and Running Gap. Currently the index is trading in a Symmetrical Triangle consolidation pattern in a down trend.
Immediate support at 600 and Immediate Resistance at 734 (38.2% Fibonacci Retracement Level and also a Runaway Gap Resistance). Probable direction for REIT index: Range Bound between 600 and 734. Previous chart on FTSE ST REIT index can be found in the last post Singapore REIT Fundamental Comparison Table on Mar 8, 2020.
Fundamental Analysis of 40 Singapore REITs
The following is the compilation of 42 REITs in Singapore with colour coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio. This gives investors a quick glance of which REITs are attractive enough to have an in-depth analysis. DPU Yield for Elite Commercial REIT, United Hampshire REIT and Lendlease Global Commercial REIT are projection based on the IPO prospectus.
- Note 1: The Financial Ratio are based on past data and there are lagging indicators.
- Note 2: This REIT table would be the last “Normal” table (with last financial data) before impacted by the future dividend cut due to COVID-19 outbreak.
- Noted 3: Distribution Yield, NAV, Gearing Ratio would probably be adjusted moving forward.
- Note 4: Historical Price/NAV High and Low information is available here.
- Price/NAV decreases from 1.07 to 0.80 (Singapore Overall REIT sector is undervalued now).
- Distribution Yield increases from 6.64% to 9.64% (take note that this is lagging number). About 80% of Singapore REITs (32 out of 42) have Distribution Yield > 7%. Do note that these yield numbers are based on current prices with historical (pre Covid-19) yields.
- Gearing Ratio stays at 35.39%. 26 out of 42 have Gearing Ratio more than 35%. In general, Singapore REITs sector gearing ratio is healthy. Note: Gearing may be affected (ie. potential increase) as the valuation pf the portfolio would be reduced.
- The most overvalue REIT is Keppel DC REIT (Price/NAV = 2.04), followed by Parkway Life (Price/NAV = 1.61), Mapletree Industrial Trust (Price/NAV = 1.34), Mapletree Logistic Trust (Price/NAV = 1.27) and Ascendas REIT (Price/NAV = 1.18).
- The most undervalue (base on NAV) is Eagle Hospitality Trust* (Price/NAV =0.15), followed by Lippo Malls Indonesia Retail Trust (Price/NAV = 0.38), ARA Hospitality Trust (Price/NAV = 0.36),CDL HT (Price/NAV = 0.47) and Starhill Global (Price/NAV = 0.45)
- The Highest Distribution Yield (TTM) is Eagle Hospitality Trust* (33.85%) followed by Lippo Malls Indonesia Retail Trust (21.24%), ARA Hospitality Trust (17.82%) and ESR REIT (16.04%). Reminder that these yield numbers are based on current prices with historical (pre Covid-19) yields. Dividend would be cut in next 2-3 quarters.
- The Highest Gearing Ratio are ESR REIT (41.5%), OUE Comm REIT (40.3%), Far East HTrust (39.2%), Cache Logistic Trust (40.1%) and IREIT Global (39.3%).
- Top 5 REITs with biggest market capitalisation are Ascendas REIT ($9.65B), CapitaMall Trust ($5.98B), Capitaland Commercial Trust ($5.40B), Mapletree Commercial Trust ($5.22B), Mapletree Logistic Trust ($5.89B)
- The bottom 3 REITs with smallest market capitalisation are Eagle Hospitality Trust ($171M), ARA Hospitality Trust ($260M) and BHG Retail REIT ($259M)
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 investing decision, Sign up next REIT Investing Workshop here to learn how to choose a fundamentally strong REIT for long term investing for passive income generation.
*Eagle Hospitality Trust is currently suspended
Interest Rate Watch
- 1 month decreases from 1.46701% to 0.99000%
- 3 month decreases from 1.47101% to 1.01000%
- 6 month increases from 1.60431% to 1.77000%
- 12 month decreases from 1.93600% to 1.43887%
Fundamentally the whole Singapore REITs is undervalued now based on simple average on the Price/NAV. The big cap REITs rebounded quickly after the huge REIT crash. Valuation are very attractive across all the REITs but do take note that NAV is lagging. NAV would probably be reduced caused by the devaluation of property value caused by the COVID-19 lock down.
The most impacted sectors are Hospitality and Retail Malls and we see huge sell down over the past few weeks. Keppel DC REIT, Parkway Life REIT, Ascendas REIT, Mapletree Logistic Trust and Mapletree Industrial Trust are holding well during this sell off.
Yield spread (reference to 10 year Singapore government bond of 1.095%) has widened greatly from 5.42% to 8.54%. The risk premium are very attractive to accumulate slowly in stages to lock in the current valuation and long term yield after the recovery.
The market would be very volatile during this period because it is a huge fight between the bull and bear.
Investors should LOOK BEYOND COVID-19 when comes to investing in REITs with an eye wide opens that there will be dividend cut in the near term.
STAY HOME and INVEST SAFELY!
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