Singapore REITs Monthly Update (December 5th, 2023)

Wishing everyone a Merry Christmas and a Happy New Year!!

Technical Analysis of FTSE ST REIT Index (FSTAS351020)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) decreased from 641.39 to 686.24 (6.99%) compared to last month’s update. The REIT index broke out from the inverted head and shoulder reversal pattern, retraced to test the neckline resistance turned support at 662 and resume the uptrend after breakout. The 662 line is now the support, with the resistance line the downward red line. It now is a matter of whether the REIT index can break through the new resistance, which may signify bullish times for the REIT index. The Moving Averages have now changed.

  • Short-term direction: Up
  • Medium-term direction: Sideways
  • Long-term direction: Down
  • Immediate Support at 622
  • Immediate Resistance at about 690 (downward trend line, around the 200D SMA)

FTSE REIT Index Chart

Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on November 10th, 2023.

 

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.

  • The Financial Ratios are based on past data and these are lagging indicators.
  • All REITs have the latest Q3 2023 update values.
  • I have introduced weighted average (weighted by market cap) to the financial ratios, in addition to the existing simple average ratios. This is another perspective where smaller market cap REITs do not disproportionately affect the average ratios.

Data from REITsavvy Screener. https://screener.reitsavvy.com/

 

 

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.
  • Yield (ttm): Yield, calculated by DPU (trailing twelve months) and Current Price as of December 8th, 2023. Notes:
    • ESR-LOGOS REIT and Paragon REIT: Annualised yield, after taking into account switch to semi-annual distribution declaration. For Paragon REIT: calculated after converting from 13 months of distribution to 12 months.
  • Gearing (%): Leverage Ratio.
  • Price/NAV: Price to Book Value. Formula: Current Price 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 0.76. (Weighted Average: 0.76)
    • Increased from 0.71 in November 2023.
    • Singapore Overall REIT sector is very undervalued now.
    • Take note that NAV is adjusted upwards for some REITs due to pandemic recovery.
  • Most overvalued REITs (based on Price/NAV)
    • ParkwayLife REIT 1.55
      Keppel DC REIT 1.45
      Mapletree Industrial Tr 1.23
      Capitaland Ascendas REIT 1.23
      Mapletree Logistics Tr 1.15
      AIMS APAC REIT 0.97
    • Only 5 REITs are overvalued now based on Price/NAV value.
    • No change in the Top 2 in the last 7 months.
  • Most undervalued REITs (based on Price/NAV)
    • Manulife US REIT 0.18
      Lippo Malls Indonesia Retail Trust 0.24
      Prime US REIT 0.25
      Keppel Pacific Oak US REIT 0.35
      ARA Hospitality Trust 0.36
      EC World REIT 0.40

Distribution Yields Overview

  • TTM Distribution Yield decreased to 8.83%. (Weighted Average is 6.46%)    
    • Decreased from 9.57% in November 2023 (Weighted Average was 6.68%)
    • 19 of 40 Singapore REITs have ttm 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.
    • 8 REITs have a ttm yield of over 10%!
  • Highest Distribution Yield REITs (ttm)
    • Manulife US REIT 30.57
      Prime US REIT 29.84
      Keppel Pacific Oak US REIT 18.86
      Elite Commercial REIT 13.47
      United Hampshire REIT 13.07
      EC World REIT 12.85
    • Reminder that these yield numbers are based on current prices. This has caused Manulife US REIT and Prime US REIT’s ttm yields to be over 25%.
    • 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 tightened to 5.77%. (Weighted Average remains similar at 4.39%) 
    • Tightened from 6.24% in November 2023. (Weighted Average was 4.40%)

Gearing Ratios Overview

  • Gearing Ratio increased to 38.16%. (Weighted Average: 38.38%)    
    • Increased from 38.08% of November 2023. (Weighted Average: 38.34%)  
    • Gearing Ratios are updated quarterly. Only Cromwell European REIT have updated their Gearing Ratios since the previous update.
    • S-REITs Gearing Ratio has been on a steady uptrend. It was 35.55% in Q4 2019.
  • Highest Gearing Ratio REITs
    • Manulife US REIT 56.0
      Elite Commercial REIT 45.4
      Prime US REIT 43.7
      Lippo Malls Indonesia Retail Trust 43.0
      Suntec REIT 42.7
      Capitaland China Trust 42.4
    • Manulife’s gearing ratio has exceeded MAS’s gearing limit of 50%. In this month’s Money and Me episode, we discussed why has the proposal to rescue Manulife US REIT fallen flat, and can Manulife US REIT be saved. Listen to it here.

Market Capitalisation Overview

  • Total Singapore REIT Market Capitalisation increased by 7.45% to S$92.404 Billion.
    • Increased from S$85.99 Billion in November 2023.
  • Biggest Market Capitalisation REITs (S$):
    • Capitaland Integrated Commercial Trust 12649.67
      Capitaland Ascendas REIT 12513.02
      Mapletree Logistics Tr 8095.89
      Mapletree Pan Asia Commercial Trust 7454.66
      Mapletree Industrial Tr 6546.54
      Frasers Logistics & Commercial Trust 4156.44
    • There are no change in the rankings since November 2022.
  • Smallest Market Capitalisation REITs (S$):
    • Lippo Malls Indonesia Retail Trust 146.24
      Manulife US REIT 166.77
      ARA Hospitality Trust 216.61
      EC World REIT 226.75
      Elite Commercial REIT 231.62
      BHG Retail REIT 259.80

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 November 2023

Source: https://screener.reitsavvy.com/

 

 

SG 10 Year & US 10 Year Government Bond Yield

  • SG 10 Year: 2.89% (decreased from 3.13%)
  • US 10 Year: 4.23% (decreased from 4.66%)

Summary

The past month has been a bullish month for S-REITs as there is a huge drop in US 10 years government bond yield from 5% to 4.2% although many REITs reported drop in DPU year over year. Fundamentally, the whole Singapore REITs landscape remains very undervalued based on the average Price/NAV (at 0.76) value of the S-REITs, with still a very attractive DPU yield of 8.83%! (Weighted average yield of 6.46%). Do take note that NAV and DPU are lagging numbers.

 

 

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

Weighted Average Yield spread (in reference to the 10-year Singapore government bond yield of 2.89% as of 10th December 2023) narrowed slightly from 4.40% to 4.39%. The Fed Rate has however adjusted its forecast to lower earlier. expecting to keep its Fed Rate high (5.25% to 5.50% band) only until April 2024, with the highest probability of dropping to 4.00% to 4.25% band by the end of 2024, much earlier than previous predictions.

 

 

The REIT index has now broken the resistance on an Inverted Head and Shoulders chart pattern, and the 662 neckline resistance turned support is now the new support, and 200 SMA as the immediate dynamic resistance. It is now a matter of whether the REIT index can break through the new resistance, which may signify bullish times for the REIT index. The short-term Moving Averages showing short term bullish signals.

 

Want to know more about the REITs market outlook for 2024? Want to gain insights into subsector performances, management strategies for navigating macro challenges and risks to watch when venturing overseas for REITs? Watch my interview “REIT Outlook: Pro Forecasts, Strategies and Picks for 2024″ with the Financial Coconut now!

 

Kenny Loh is a 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

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