During recent gathering, some of my friends were asking about investment opportunity in SGX-listed REITs. Hence I decided to do a bit of study in REITs. Although REIT index underperformed against the STI, there are still potential outlook for REITs consider the recovery in global economy. At least that’s my view on the direction of global economy. The following is an excerpt from Business Times (29 Aug 09) on REITs’ performance:
“The Straits Times Reit Index has underperformed the benchmark Straits Times Index almost every day in the past 12 months. Despite some recovery since March, Reit returns are still some 15 per cent behind the equity index. Unit prices have been driven down by concerns over refinancing and worries that commercial or industrial rentals will not get sprightly, and that hospitality rates will remain depressed. Yet they have not been doing all that badly, even if the market has not realised it yet. A Phillip Securities research report found that on a year-on-year basis, out of the 18 Reits that have announced their results, 12 reported revenue growth, one reported flat revenue growth while five reported negative revenue growth. Nine Reits saw an increase in distribution per unit (DPU); the other nine saw a decrease.”
Whilst many REIT-counters had surged by as much as 100% since their low in Mar 09, the valuation and outlook remains attractive for some. I’ll just pick a few REITs to share with all. These REITs may see lower returns for the year but has remained strong and struggled well in the midst of the recession.
“The Straits Times Reit Index has underperformed the benchmark Straits Times Index almost every day in the past 12 months. Despite some recovery since March, Reit returns are still some 15 per cent behind the equity index. Unit prices have been driven down by concerns over refinancing and worries that commercial or industrial rentals will not get sprightly, and that hospitality rates will remain depressed. Yet they have not been doing all that badly, even if the market has not realised it yet. A Phillip Securities research report found that on a year-on-year basis, out of the 18 Reits that have announced their results, 12 reported revenue growth, one reported flat revenue growth while five reported negative revenue growth. Nine Reits saw an increase in distribution per unit (DPU); the other nine saw a decrease.”
Whilst many REIT-counters had surged by as much as 100% since their low in Mar 09, the valuation and outlook remains attractive for some. I’ll just pick a few REITs to share with all. These REITs may see lower returns for the year but has remained strong and struggled well in the midst of the recession.
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Suntec REIT
Property owned: Suntec City Mall and certain office units in Suntec Towers One, Two and Three and the whole of Suntec Towers Four and Five, Park Mall, Chijmes and one-third interest in One Raffles Quay.
Reporting period: 1H2009
Rental revenue = $129.4m (up 12.4% year-on-year)
Returns after tax = $58.4m (down 10.3% year-on-year)
Overall occupancy rate = 94.8%
Distribution per unit = 5.895 cents (up 11% year-on-year)
NAV = $1.984
Current price = $1.01
Yield = 5.84%
Recent significant activities: Suntec REIT invests S$25m equity stake to gain strategic foothold in Suntec Singapore international convention & exhibition centre.
Analysts’ target = $1.07 (CIMB), $0.94 (hold – Phillip)
My view: Suntec REIT has huge growth potential considers the development in the area includes construction of Circle Line and Marina Bay Sands which will bring in more crowd and activities after completion. However, near term stock movement is highly uncertain considers the presumably economic recovery is still at infant stage. On 28 April 2009, Suntec REIT obtained a secured facility of S$825.0 million Term Loan Facility with a panel of 7 banks to refinance all borrowings maturing in FY 2009. This give us a breather on its refinancing needs.
My recommendation is to buy half of your target quantity for its yield and hold. Should there be a technical downturn, you should then accumulate to your target quantity.
Suntec REIT
Property owned: Suntec City Mall and certain office units in Suntec Towers One, Two and Three and the whole of Suntec Towers Four and Five, Park Mall, Chijmes and one-third interest in One Raffles Quay.
Reporting period: 1H2009
Rental revenue = $129.4m (up 12.4% year-on-year)
Returns after tax = $58.4m (down 10.3% year-on-year)
Overall occupancy rate = 94.8%
Distribution per unit = 5.895 cents (up 11% year-on-year)
NAV = $1.984
Current price = $1.01
Yield = 5.84%
Recent significant activities: Suntec REIT invests S$25m equity stake to gain strategic foothold in Suntec Singapore international convention & exhibition centre.
Analysts’ target = $1.07 (CIMB), $0.94 (hold – Phillip)
My view: Suntec REIT has huge growth potential considers the development in the area includes construction of Circle Line and Marina Bay Sands which will bring in more crowd and activities after completion. However, near term stock movement is highly uncertain considers the presumably economic recovery is still at infant stage. On 28 April 2009, Suntec REIT obtained a secured facility of S$825.0 million Term Loan Facility with a panel of 7 banks to refinance all borrowings maturing in FY 2009. This give us a breather on its refinancing needs.
My recommendation is to buy half of your target quantity for its yield and hold. Should there be a technical downturn, you should then accumulate to your target quantity.
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Mapletree Logistics Trust
Invest in a diversified portfolio of quality income-producing logistics real estate and real estate-related assets in Asia. By 30 June 2009, this has grown to a portfolio of 81 properties, with a book value of approximately S$2,906 million spread across 6 countries: 47 are in Singapore, 11 in Malaysia, 8 each in Hong Kong and Japan, 6 in China, and 1 in South Korea.
Reporting period: 1H2009
Rental revenue = $105.2m (up 21.7% year-on-year)(2Q 2009 started and ended with 81 properties. 2Q 2008 started with 72 properties and ended with 76 properties)
Returns after tax = $57.3m (up 11.8% year-on-year)
Overall occupancy rate = 98.3%
Distribution per unit = 2.95 cents (down 25% year-on-year)(decrease in DPU y-o-y due to additional units arising from the rights issue in Aug 2008)
NAV = $0.88
Current price = $0.645
Yield = 4.57%
Recent significant activities: Rights issue of 3 units for every 4 units owned at a right price of $0.9285.
Analysts’ target = $0.70 (DBS)
My view: With low PE, low PB and reason yield, it is recommended to buy half of your target quantity. Should there be a technical downturn in the 2H2009, you can then complete your acquisition. I still hold the view that global economy has passed the pit of the business cycle.
To be continue……..
Mapletree Logistics Trust
Invest in a diversified portfolio of quality income-producing logistics real estate and real estate-related assets in Asia. By 30 June 2009, this has grown to a portfolio of 81 properties, with a book value of approximately S$2,906 million spread across 6 countries: 47 are in Singapore, 11 in Malaysia, 8 each in Hong Kong and Japan, 6 in China, and 1 in South Korea.
Reporting period: 1H2009
Rental revenue = $105.2m (up 21.7% year-on-year)(2Q 2009 started and ended with 81 properties. 2Q 2008 started with 72 properties and ended with 76 properties)
Returns after tax = $57.3m (up 11.8% year-on-year)
Overall occupancy rate = 98.3%
Distribution per unit = 2.95 cents (down 25% year-on-year)(decrease in DPU y-o-y due to additional units arising from the rights issue in Aug 2008)
NAV = $0.88
Current price = $0.645
Yield = 4.57%
Recent significant activities: Rights issue of 3 units for every 4 units owned at a right price of $0.9285.
Analysts’ target = $0.70 (DBS)
My view: With low PE, low PB and reason yield, it is recommended to buy half of your target quantity. Should there be a technical downturn in the 2H2009, you can then complete your acquisition. I still hold the view that global economy has passed the pit of the business cycle.
To be continue……..
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