Real estate, alternative real assets and other diversions

Singapore REITs #6 The market update for December

The Fund Manager

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) has increased from 767.98  to 783.05 (+1.96%) compared to my last post on Singapore REIT Fundamental Comparison Table on 5 November 2018.

Currently the index is trading in a downward trend channel after finding a short term support at around 760. This support has been tested on four occasions since mid October. Currently, the REIT index moves above the 20D and 50D SMA indicating short term bullishness. There may be a chance the REIT index enters into a sideways consolidation mode based on the chart pattern.
Based on the current chart pattern and trend analysis, the trend for the Singapore REIT direction is SIDEWAYS to DOWN! The REIT index will be capped by the immediate resistance at about 800 which is the 200D SMA resistance and also the round number.

Chart 1: FTSE ST REIT Index (FSTAS8670)

Fundamental Analysis of 39 Singapore REITs

Table 2 is a compilation of 39 REITs in Singapore as of November 2018, with colour coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio. This gives investors a quick glance as to which REITs are attractive enough to have an in-depth analysis.

Table 2: Singapore REIT Fundamental Comparison Table December 2018

Summary of Singapore REITs Table (December 2018) compared to November 2018 Singapore REITs Table:

  • Price/NAV increased from 0.93 to 0.94 (Singapore overall REITs sector is now under value).
  • Distribution yield stayed at 7.16% (take note that this is lagging number). About 46% of Singapore REITs (18 out of 39) have a distribution yield >7%.
  • Gearing ratio increased slightly from 34.5% to 34.6%. 19 out of 39 have a gearing ratio of more than 35%. In general, the Singapore REITs sector gearing ratio is healthy. Note: The limit of the gearing ratio for REITs listed in Singapore Stock Exchange is 45%.
  • The most overvalued REIT is Parkway Life (Price/NAV = 1.57), followed by Keppel DC REIT (Price/NAV = 1.33), Mapletree Industrial Trust (Price/NAV = 1.28) and Ascendas REIT (Price/NAV = 1.25).
  • The most undervalued (base on NAV) is OUE Comm REIT (Price/NAV = 0.53), followed by Fortune REIT (Price/NAV = 0.56), Keppel KBS US REIT (Price/NAV=0.64), Far East Hospitality Trust (Price/NAV = 0.69) and Starhill Global REIT (Price/NAV = 0.74).
  • The highest distribution yield (TTM) is Lippo Mall Indonesia Retail Trust (12.39%), followed by Cromwell European REIT (10.76%), Keppel KBS US REIT (10.58%), OUE Comm REIT (9.51%), Sasseur REIT (9.02%), SoilBuild BizREIT (8.99%), EC World REIT (8.73%) and Cache Logistic Trust (8.51%).
  • The highest gearing ratios are Far East HTrust (40.3%) and OUE Comm REIT (41.4%).

Charts 3 & 4 are the Singapore REITs bubble charts used visually for different screening purposes. The size of the bubbles represents the market capitalisation of a REIT. In one glance, we can immediately compare the size of the market value between REITs.

Chart 3 compares different Singapore REITs with distribution yields relative to the Price/NAV valuation. We can find REITs with an attractive valuation from the Top Left Quadrant (i.e. under value and a high distribution yield).

Chart 3: Singapore REIT Bubble Chart: Value Pick

Chart 4 compares different Singapore REITs with a gearing ratio relative to the Price/NAV valuation. We can find REITs with risks of value destruction due to potential rights issues from the Top Right Quadrant (i.e. over value and a high gearing ratio).

Chart 4 Singapore REIT Bubble Chart: Risk Avoidance

Sector Comparisons for Singapore REITs

The Fund Manager

About Kenny Loh

Kenny Loh

Kenny has been investing in Singapore REITs for about 8 years. He is one of the pioneers of financial bloggers in Singapore. Since 2009, Kenny has been blogging at http://mystocksinvesting.com, reaching 19 thousand unique monthly visitors from 110 countries now. Over the years, Kenny has conducted many seminars and benefited thousands of investors by collaborating with SGX, SIAS, CIMB, RHB, Maybank Kim Eng, CMC Market, City Index, ShareInvestor, InvestingNote, iFAST, Aberdeen Standard Asset Management, Natixis Global Asset Management, Wealth Academy Investor Inner Circle (WAIIC) and Online Traders Club Singapore (OTCS). Kenny has since taught hundreds of attendees, from students, fund managers and businessmen to retirees, teachers, and even fashion designers.

Articles by Kenny Loh

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