Technical Analysis of FTSE ST REIT Index (FSTAS351020)
FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased from 827.88 to 864.41 (4.41%) compared to the last month update. The Singapore REIT index rebounded off from the support level at 807 3 times, broke the 836 resistance turned support level and is now trading between the 836-890 range.
- Support Lines: Blue
- Resistance Lines: Red
- Short-term direction: Upwards
- Medium-term direction: Sideways
- Long-term direction: Sideways
- Immediate Support at 836, followed by 807.
- Immediate Resistance at 890.
The REIT Index traded between 807 and 836 for much of March, before breaking the 836 resistance on March 17. It has entered a short-term uptrend since then, reaching 864.41 as of now.
Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on March 6th, 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.
- All REITs are now updated with the Q4 2021 business updates/earnings. SPH REIT has the latest Q1 2022 business updates/earnings.
- Digital Core REIT has recently IPOed in December (highlighted in yellow) and have their values extracted from IPO Prospectuses. Yield is 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 2020 as the base (during the pandemic)
- Yield (ttm): Yield, calculated by DPU (trailing twelve months) and Current Price as of April 2nd, 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 increased to 1.00.
- Changed from 0.97 from March 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 = 2.03)
- Keppel DC REIT (Price/NAV = 1.69)
- Mapletree Industrial Trust (Price/NAV = 1.50)
- Mapletree Logistics Trust (Price/NAV = 1.36)
- Digital Core REIT (Price/NAV = 1.33)
- ARA LOGOS Logistics Trust (Price/NAV = 1.26)
- No change in the Top 6 constituents compared to last month (March 6th 2022 update)
- Most undervalued REITs (based on Price/NAV)
- Lippo Malls Indonesia Retail Trust (Price/NAV = 0.56)
- BHG Retail REIT (Price/NAV = 0.62)
- ARA US Hospitality Trust (Price/NAV = 0.71)
- OUE Commercial REIT (Price/NAV = 0.74)
- Starhill Global REIT (Price/NAV = 0.76)
- Far East Hospitality Trust (Price/NAV = 0.76)
Distribution Yields Overview
- TTM Distribution Yield decreased to 5.86%.
- Decreased from 6.00% in March 2022.
- 14 of 40 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 economic recovery.
- Highest Distribution Yield REITs (ttm)
- United Hampshire REIT (9.38%)
- Prime US REIT (9.04%)
- Keppel Pacific Oak US REIT (8.68%)
- EC World REIT (8.64%)
- First REIT (8.56%)
- Elite Commercial REIT (8.42%)
- 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 3.49%.
- Decreased from 4.14% in March 2022.
Gearing Ratios Overview
- Gearing Ratio remained similar at 37.03%.
- Decreased from 37.04% in March 2022.
- Gearing Ratios are updated quarterly. Only SPH REIT has its gearing ratio updated compared to last month.
- 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 (43.7%)
- Manulife US REIT (42.8%)
- Frasers Hospitality Trust (42.5%)
- Lippo Malls Retail Trust (42.5%)
- Elite Commercial REIT (42.4%)
- No Change compared to last month’s update
Market Capitalisation Overview
- Total Singapore REIT Market Capitalisation increased by 4.71% to S$111.89 Billion.
- Increased from S$106.86 Billion in February 2022.
- Biggest Market Capitalisation REITs:
- Capitaland Integrated Commercial Trust ($15.07B)
- Ascendas REIT ($12.37B)
- Mapletree Logistics Trust ($8.69B)
- Mapletree Industrial Trust ($7.18B)
- Mapletree Commercial Trust ($6.28B)
- Frasers Logistics & Commercial Trust ($5.46B)
- No change in Top 5 rankings since August 2021.
- Smallest Market Capitalisation REITs:
- BHG Retail REIT ($292M)
- ARA US Hospitality Trust ($381M)
- Lippo Malls Indonesia Retail Trust ($407M)
- United Hampshire REIT ($440M)
- First REIT ($490M)
- Sabana REIT ($503M)
- No change in Top 6 rankings compared to last month’s update
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 Best Performers of the Month in March 2022
SG 10 Year & US 10 Year Government Bond Yield
- SG 10 Year: 2.37% (increased from 1.84%)
- US 10 Year: 2.39% (decreased from 1.77%)
Major REIT News in March 2022
ESR, ALOG Unitholders vote in favour of merger to form ESR-LOGOS REIT
THE BUSINESS TIMES: THE managers of ESR-Reit [ESR-REIT : J91U -1.16%] and Ara Logos Logistics Trust (ALog Trust) [ARA LOGOS Log Tr : K2LU -0.59%] must surely be heaving huge sighs of relief.
After a series of speed bumps, the managers of the 2 real estate investment trusts (Reits) have finally gotten the nod of approval by their respective unitholders to go ahead with the merger to form ESR-Logos Reit (E-Log Reit).
At its extraordinary general meeting (EGM) at 10 am on Monday (Mar 21), unitholders of ESR-Reit voted overwhelmingly in favour of the merger.
Some 98.6 per cent of unitholders voted in favour of the merger, and 98.4 per cent agreed to the issuance of new ESR-Reit units to ALog Trust unitholders at an issue price of S$0.4924 apiece as part of the consideration of the merger.
Valid votes were cast by unitholders holding a total of 1.22 billion ESR-Reit units.
“The EGM results validate our belief that unitholders appreciate the importance of size and scale as we embark on our next phase of growth,” said Adrian Chui, chief executive officer of the ESR-Reit manager. Read More here
View our 2-part Q&A Series with ESR REIT and ALOG REIT here, with your questions regarding the merger answered.
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 increased in market cap.
Notably, 4 of 5 of the strongest performers are Hospitality REITs. This can be attributed to the full reopening of Singapore’s borders for vaccinated travelers. Only 6 REITs have dropped in the past month.
Yield spread (in reference to the 10 year Singapore government bond of 2.37% as of 3rd April 2022) tightened significantly from 4.14% to 3.49%. The S-REIT Average Yield remained almost the same, but with an increase in Singapore Government Bond Yields from 1.84% to 2.37%, Yield Spread tightened.
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.
Technically the FTSE ST REIT index has started a short term trend with the eye of the next crucial resistance at 890 to break. Breaking this resistance will wake up the bull for the Singapore REITs sector.
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