Singapore REITs – monthly update

by Kenny Loh | Feb 5, 2021

The Analyst

Singapore REITs – monthly update

by Kenny Loh | Feb 5, 2021

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FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased from 854.19 to 877.59 (+2.74%) since last month’s update. Currently the Singapore REIT index has started an uptrend after breaking resistance around 852 and 874.
Yield spread (reference to ten-year Singapore government bond of 1.004%) widened slightly from 4.407% to 4.449%. However, the risk premium is still attractive to accumulate Singapore REITs in stages to lock in the current price and long-term yield after recovery. Moving forward, an increase in DPU is expected due to global economic recovery.
Technically the REIT Index broke the resistance and started an uptrend. Current macro factors such as a low interest-rate environment, aggressive M&A for future DPU growth and recovery of the global economy support the bullish breakout.

Technical analysis

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased from 854.19 to 877.59 (+2.74%) compared with last month’s update. Currently the Singapore REIT index has started an uptrend after breaking resistance around 852 and 874.

As for now, short-term direction is an up trend. (All 20D, 50D and 200D SMA have started trending up.)
Immediate support at 874 (resistance turned support).
Immediate resistance at 900, followed by 940.

Most overvalued REITs

Keppel DC REIT (price/NAV = 2.35)
Parkway Life (price/NAV = 1.97)
Mapletree Industrial Trust (price/NAV = 1.68)
Mapletree Logistics Trust (price/NAV = 1.60)
Ascendas REIT (price/NAV = 1.40)

Most overvalued REITs (based on price/NAV)

Keppel DC REIT (price/NAV = 2.45)
Parkway Life (price/NAV = 2.08)
Mapletree Industrial Trust (price/NAV = 1.70)
Mapletree Logistics Trust (price/NAV = 1.68)
Ascendas REIT (price/NAV = 1.47)

No change from December 2020 for top five overvalued REITs ranking.

Most undervalued REITs (based on price/NAV)

Lippo Malls Indonesia Retail Trust (price/NAV = 0.23)
First REIT (price/NAV = 0.49)
Starhill Global REIT (price/NAV = 0.64)
OUE Commercial REIT (price/NAV = 0.65)
ARA Hospitality Trust (price/NAV = 0.69)
BHG REIT (price/NAV = 0.71)

Highest distribution yield REITs (TTM)

First REIT (16.94%)
Lippo Malls Indonesia Retail Trust (12.62%)
KepPacOak US REIT (8.75%)
Sasseur REIT (7.61%)
EC World REIT (7.51%)
ARA LOGOS Logistic Trust (7.48%)

Remember 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.

Highest gearing ratio REITs

Eagle Hospitality Trust (65.5%) – trading suspended and filed for Chapter 11 bankruptcy protection
First REIT (49%)
ARA Hospitality Trust (43%)
Lippo Malls Retail Trust (42.5%)
ESR REIT (41.6%)
Suntec REIT (41.5%)
Capitaland Integrated Commercial Trust (40.6%)
ARA Logos Logistic Trust (40.5%)
OUE Commercial REIT (40.3%)
Mapletree NAC Trust (40.1%)

Total Singapore REIT market capitalisation = S$107.2bn

Increased from S$103.5bn in December 2020

Biggest market capitalisation REITs:

Capitaland Integrated Commercial Trust ($14.89bn)
- Ascendas REIT ($11.75bn)
- Mapletree Logistics Trust ($8.35bn)
- Mapletree Commercial Trust ($7.23bn)
- Mapletree Industrial Trust ($6.86bn)

Smallest market capitalisation REITs:

Eagle Hospitality Trust ($119m)
First REIT ($198m)
United Hamsphire REIT ($286m)
BHG Retail REIT ($301m)
ARA Hospitality Trust ($386m)
Sabana REIT ($395m)

Fundamental analysis of 40 Singapore REITs

The chart below is the compilation of 40 REITs in Singapore with colour coding for the distribution yield, gearing ratio and price to NAV ratio. This gives investors a quick glance of which REITs are attractive enough to have an in-depth analysis (source here).

Note 1: The financial ratios 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 12 months (TTM), therefore REITs with delayed payouts might have lower displayed yields, thus yield displayed might be lower.

Note 3: Currently Singapore REITs are in the middle of Q4 earnings release.

Price/NAV increased to 1.01
- Increased from 0.98 in December 2020.
- Singapore overall REIT sector is at about fair value now.

TTM distribution yield increased to 5.45%
- Increased from 5.30% in December 2020.
- After Q3 earning release (and Q4 earnings release for six REITs) and after factoring in the dividend cut impact caused by covid-19).
- About 22.5% of Singapore REITs (nine out of 40) 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.

Gearing ratio at 38.19%
- Increased from 37.63% in December 2020
- In general, the Singapore REITs sector gearing ratio is healthy but has started to increase due to the reduction of the valuation of portfolios and increase in borrowing.

About Kenny Loh

Kenny Loh is a Associate 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 and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a Certified Financial Planner, REIT Trainer of Singapore Exchange, Certified Trainer of Institute of Banking and Finance Singapore. Kenny started his personal investment blog http://mystocksinvesting.com in 2009.