新年快乐! Have a happy Chinese New Year!

Technical Analysis of FTSE ST REIT Index (FSTAS351020)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased from 712.46 to 676.08 (-5.11%) compared to last month’s update. The REIT index is now in a downward parallel channel, with the 200D SMA being the immediate resistance, followed by the 739 as the next resistance.

• Short-term direction: Down
• Medium-term direction: Sideways
• Long-term direction: Sideways
• Immediate Support at 662 (previous low in Oct 2022)
• Immediate Resistance at 200D SMA, 739

FTSE REIT Index Chart

Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on January 7th, 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.
• REITs highlighted in cyan have the latest Q4 2023 update values, the rest have Q3 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 February 9th, 2023.

• 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 decreased to 0.75 (Weighted Average: 0.75)
  • Decreased from 0.79 in January 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	1.53
    Mapletree Industrial Tr	1.29
    Keppel DC REIT	1.28
    Capitaland Ascendas REIT	1.23
    Mapletree Logistics Tr	1.08
    Frasers Centrepoint Trust	0.97

  • Only 5 REITs are overvalued now based on Price/NAV value.
  • After 9 months of reigning in the Top 2, Mapletree Industrial Trust has taken Keppel DC REIT’s place.

• Most undervalued REITs (based on Price/NAV)

  • Manulife US REIT	0.18
    Lippo Malls Indonesia Retail Trust	0.19
    Prime US REIT	0.21
    Keppel Pacific Oak US REIT	0.31
    ARA Hospitality Trust	0.37
    EC World REIT	0.40

Distribution Yields Overview

• TTM Distribution Yield decreased to 8.21%. (Weighted Average is 6.32%)    
  • Decreased from 8.35% in January 2023. (Weighted Average was 6.16%)
  • 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.
  • 7 REITs have a ttm yield of over 10%!

• Highest Distribution Yield REITs (ttm)

  • Prime US REIT	34.31
    Keppel Pacific Oak US REIT	21.12
    Elite Commercial REIT	14.22
    EC World REIT	12.85
    Cromwell European REIT	11.76
    United Hampshire REIT	11.35

  • Reminder that these yield numbers are based on current prices. This has caused and Prime US REIT’s ttm yields to be over 25%. Manulife US REIT has announced a distribution halt as part of its recapitalisation plan.
  • 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 5.07%. (Weighted Average widened slightly to 3.85%)     
  • Tightened from 5.40% in January 2023. (Weighted Average was 3.80%)

Gearing Ratios Overview

• Gearing Ratio decreased to 38.06%. (Weighted Average: 37.86%)    
  • Decreased from 38.16% of January 2023. (Weighted Average: 38.38%)  
  • Gearing Ratios are updated quarterly.
  • S-REITs Gearing Ratio has been on a steady uptrend. It was 35.55% in Q4 2019.

• Highest Gearing Ratio REITs

  • Manulife US REIT	58.3
    Elite Commercial REIT	45.4
    Prime US REIT	43.7
    Lippo Malls Indonesia Retail Trust	43.0
    Suntec REIT	42.3
    United Hampshire REIT	41.7

  • Manulife’s gearing ratio has exceeded MAS’s gearing limit of 50%. In last 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 decreased by 7.51% to S$90.08 Billion.
  • Decreased from S$97.46 Billion in January 2023.

• Biggest Market Capitalisation REITs (S$):

  • Capitaland Integrated Commercial Trust	13233.50
    Capitaland Ascendas REIT	11826.00
    Mapletree Logistics Tr	7504.70
    Mapletree Pan Asia Commercial Trust	7297.50
    Mapletree Industrial Tr	6735.40
    Frasers Logistics & Commercial Trust	4114.00

  • There are no change in the rankings since November 2022.

• Smallest Market Capitalisation REITs (S$):

  • Manulife US REIT	110.40
    Lippo Malls Indonesia Retail Trust	115.50
    Elite Commercial REIT	130.40
    ARA Hospitality Trust	164.79
    Prime US REIT	190.40
    EC World REIT	226.76

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, scroll down for more information on the REITs courses.

Top 20 Worst Performers of January 2023

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

SG 10 Year & US 10 Year Government Bond Yield

• SG 10 Year: 2.98% (increased from 2.78%)
• US 10 Year: 4.18% (increased from 4.05%)

Summary

The past month was a bearish month for S-REITs again which possibly caused by the increase in US 10 Years Gov Bond Yields (highly inversely correlated with FTSE ST REIT Index in 2023) and poor earnings release by most of the REITs (which DPU was expected to drop YoY due to the full impact of interest rate). Fundamentally, the whole Singapore REITs landscape remains undervalued based on the average Price/NAV (at 0.75) value of the S-REITs, with still a very attractive DPU yield of 8.35%! (Weighted average yield of 6.32%). Do take note that NAV and DPU are lagging numbers.

Weighted Average Yield spread (in reference to the 10-year Singapore government bond yield of 2.98% as of 10th February 2023) widened slightly from 3.80% to 3.85%. Based on the CME group’s interest rate futures, there will be a high possibility of rate cut of between 100-150 bps by end of 2024.

Technically the FTSE ST REIT index is expected to be range bound between 739 to 662 until a clear breakout. The next FOMC meeting on Mar 20-2024 would be the key date REIT investors should be looking forward to.

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!

Courses: Financial Ratio Analysis and Technical Analysis for REITs with SGX Academy

Financial Ratio Analysis for Singapore REITS (2nd March 2024, 9am to 1pm)

• Learn how to assess the financial health of Singapore REITs by analyzing key ratios
• Identifying financial strengths and weaknesses, enabling them to make informed investment decisions
• Interpret ratios and understand what are the operation factors which can affect the ratio in future
• Learn how to use valuation ratios to determine the fair value of Singapore REITs and assess their sustainability.
• Identify undervalued or overvalued REITs, aiding them in making sound investment choices. 

Cost: $467  –> $373  (20% discount if you use this link!)

Venue: SGX Academy Room. 2 Shenton way
SGX Centre 1. Level 2, S068804

Laptop is required. Please bring your own laptop for the training.

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