Happy New Year!
I recently came back from a holiday in Malaysia via the VTL, and managed to visit Starhill Global REIT’s 2 properties in Kuala Lumpur. A dedicated article on that will come out soon.
Technical Analysis of FTSE ST REIT Index (FSTAS351020)
FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) decreased slightly from 843.73 to 853.35 (1.14%) 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: Up.
- Medium direction: Sideways.
- Immediate Support at 834, followed by 816.
- Immediate Resistance at 890.
Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on December 5, 2021.
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.
- 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 highlighted in green have been updated with the latest Q3 2021 business updates/earnings.
- Note 4: 2 REITs submitted their IPOs in November 2021. REITs highlighted in yellow have values extracted from IPO Prospectuses. Yield is calculated based on Estimated DPU / Price, with the Estimated DPU calculated from the Prospectus.
Price/NAV Ratios Overview
- Price/NAV increased to 1.03
- Increased from 1.00 in December 2021.
- Singapore Overall REIT sector is slightly above 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 = 2.18)
- Keppel DC REIT (Price/NAV = 1.99)
- Mapletree Industrial Trust (Price/NAV = 1.52)
- Mapletree Logistics Trust (Price/NAV = 1.43)
- Digital Core REIT (Price/NAV = 1.38)
- ARA LOGOS Logistics Trust (Price/NAV = 1.32)
- Most undervalued REITs (based on Price/NAV)
- Lippo Malls Indonesia Retail Trust (Price/NAV = 0.55)
- BHG Retail REIT (Price/NAV = 0.64)
- Frasers Hospitality Trust (Price/NAV = 0.72)
- Suntec REIT (Price/NAV = 0.74)
- Far East Hospitality Trust (Price/NAV = 0.76)
- OUE Commercial REIT (Price/NAV = 0.76)
Distribution Yields Overview
- TTM Distribution Yield decreased to 5.84%
- Decreased from 5.93% in December 2021.
- 10 of 40 (25%) 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 (9.21%)
- First REIT (9.15%)
- Sabana REIT (8.67%)
- Sasseur REIT (8.45%)
- Prime US REIT (8.18%)
- EC World REIT (8.10%)
- 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.
Gearing Ratios Overview
- Gearing Ratio remained at 37.22%
- Remained at 37.22% in December 2021.
- Gearing Ratios are updated quarterly. Thus there is no change to the 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 (48.4%)
- Suntec REIT (44.3%)
- Daiwa House Logistics Trust (43.8%)
- Lippo Malls Retail Trust (42.3%)
- Frasers Hospitality Trust (42.2%)
- Elite Commercial REIT (42.1%)
Market Capitalisation Overview
- Total Singapore REIT Market Capitalisation increased by 2.63% to S$108.9 Billion.
- Increased from S$106.1 Billion in December 2021.
- Contributed by IPO listing of Daiwa House Logistic Trust and Digital Core REIT.
- Biggest Market Capitalisation REITs:
- Capitaland Integrated Commercial Trust ($13.15B)
- Ascendas REIT ($12.41B)
- Mapletree Logistics Trust ($8.13B)
- Mapletree Industrial Trust ($7.21B)
- Mapletree Commercial Trust ($6.64B)
- No change in Top 5 rankings since August 2021.
- Smallest Market Capitalisation REITs:
- BHG Retail REIT ($92M)
- ARA Hospitality Trust ($383M)
- Lippo Malls Indonesia Retail Trust ($414M)
- United Hampshire REIT ($445M)
- Sabana REIT ($465M)
- No change in Top 5 rankings from December 2021.
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 Best Performers of the Month (December 2021)
SG 10 Year & US 10 Year Government Bond Yield
- SG 10 Year: 1.66% (decreased from 1.69%)
- US 10 Year: 1.51% (increased from 1.36%)
Major REIT News in December 2021
Mapletree Pan Asia Commercial Trust (MPACT): Proposed Merger of Mapletree Commercial trust (MCT) and Mapletree North Asia Commercial Trust (MNACT)
The Edge: The managers of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) have, on Dec 31, announced the proposed merger of both REITs.
MCT is Singapore’s largest pure-play commercial REIT while MNACT is the first and only North Asia-focused REIT to be listed in Singapore.
Post-merger, the new REIT will be named Mapletree Pan Asia Commercial Trust (MPACT). It will be Mapletree’s flagship commercial REIT positioned to be the proxy to key gateway markets of Asia.
Upon the completion of the merger, the new combined REIT will have a market capitalisation of around $10.5 billion, making it one of the top 10 largest REITs in Asia.
Together, MPACT will hold a diversified and high-quality portfolio of 18 assets across Singapore, China, Hong Kong, Japan and South Korea with assets under management (AUM) of around $17.1 billion. Read More
For the following comparison table, I used the StocksCafe REIT Screener to seive out MNACT and MCT’s fundamental and financial ratios, to see how MPACT ratios will stand. Link to Press Release. Also compared are similar REITs, including Suntec REIT, a mid-large market cap Retail/Office REIT, and Capitaland Integrated Commercial Trust, which has also similarly merged from CMT and CCT back in November 2020.
Digital Core REIT lists, jumps 15% to US$1.01 on first day
BUSINESS TIMES: DIGITAL Core Reit closed some 14.8 per cent higher than its initial public offering (IPO) price of US$0.88 at US$1.01 on Monday (Dec 6), as it made its trading debut on the mainboard of the Singapore Exchange (SGX).
Trading in units of the pure play data centre real estate investment trust (Reit) commenced after the lunch break at 2pm and opened at US$1, some 13.6 per cent higher than its IPO price.
The counter raced to an intra-day high of US$1.09 – nearly 23.9 per cent above its IPO price – before settling down to close at US$1.01 with a total of 104.8 million units changing hands. Read More
Fundamentally, the whole Singapore REITs landscape is slightly over fair value due to the recent correction based on the average Price/NAV value of the S-REITs. Below is the market cap heat map for the past 1 month. Generally, most S-REITs in the past month have increased in market cap. The 2 standout performers are EC World REIT (-7.88%) and Mapletree North Asia Commercial Trust (11%).
EC World REIT’s drop can be attributed to the recent news of a consortium of purchasers calling off a potential deal to buy over the Reit’s interest in all of its properties. When trading resumes, MNACT is very likely to jump to $1.19 due to Unitholders of MNACT receiving a consideration of SGD1.1949 per unit from the proposed merger.
Yield spread (in reference to the 10 year Singapore government bond of 1.66% as of 31st December 2021) tightened slightly from 4.29% to 4.19%. This is due to the 10 year Singapore government bond rate decreasing less (1.69% to 1.66%) compared to the average REIT yield decreasing from 5.93% to 5.84%.
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.
A month after the brief Omicron-induced sell-off (highlighted in blue), it seems that the index has already recovered to a certain extent, and due to its reduced severity, is less feared than initially thought. Since June 2020 (past 18 months) the REIT Index has consolidated and has been moving sideways ever since.
Technically the REIT Index is currently on short term sideways trend, recently bouncing back from its support at 835. Post-pandemic recovery should continue, which can lead to the stablilisation of share prices of Singapore REITs and the return of the dividend for the next few quarters. Based on the latest earning releases, most of the REITs are growing in DPU and cautiously optimistic moving into 2022.
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 Financial Advisory Manager 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