Singapore REITs – monthly update

by Kenny Loh | Mar 11, 2021

The Analyst

Singapore REITs – monthly update

by Kenny Loh | Mar 11, 2021

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FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) decreased from 877.59 to 826.65 (-5.80%) compared with last month’s update. Currently the Singapore REIT index is moving sideways after a false breakout at resistance around 874.

Yield spread (reference to ten-year Singapore government bond of 1.391%) tightened from 4.449% to 4.289%. However, the risk premiums are still attractive to accumulate Singapore REITs in stages to lock in the current price and long-term yield after the recovery. Moving forward, an increase in DPU is expected due to the global economic recovery.
Technically the REIT Index is currently trading in a sideways consolidation after the false breakout. However, 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

As for now, the short-term direction is sideways.
Immediate support at 825, followed by 775.
Immediate resistance at 874.

Most overvalued REITs (based on price/NAV)

Keppel DC REIT (price/NAV = 2.28)
Parkway Life (price/NAV = 2.09)
Mapletree Industrial Trust (price/NAV = 1.55)
Mapletree Logistics Trust (price/NAV = 1.45)
Ascendas REIT (price/NAV = 1.34)

No change from January 2021 for top five overvalued REITs ranking.

Most undervalued REITs (based on price/NAV)

Lippo Malls Indonesia Retail Trust (price/NAV = 0.36)
First REIT (price/NAV = 0.42)
OUE Commercial REIT (price/NAV = 0.63)
Starhill Global REIT (price/NAV = 0.64)
BHG REIT (price/NAV = 0.67)
Sabana REIT (price/NAV =0.73)
Suntec REIT (price/NAV = 0.73)

Highest distribution yield REITs (TTM)

First REIT (19.76%)
KepPacOak US REIT (9.16%)
Prime US REIT (8.73%)
Manulife REIT (8.42%)
Sasseur REIT (7.65%)

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%) – filed for Chapter 11 bankruptcy protection
First REIT (49%)
ARA Hospitality Trust (48.2%)
Suntec REIT (44.3%)
Lippo Malls Retail Trust (42.4%)
ESR REIT (41.6%)
Mapletree NAC Trust (41.3%)
OUE Commercial REIT (41.2%)

Total Singapore REIT market capitalisation = S$104.9bn

Decreased from S$107.2bn in January 2021

Biggest market capitalisation REITs

Capitaland Integrated Commercial Trust ($13.91bn)
Ascendas REIT ($11.64bn)
Mapletree Logistics Trust ($8.48bn)
Mapletree Commercial Trust ($6.73bn)
Mapletree Industrial Trust ($6.70bn)

Smallest market capitalisation REITs

BHG Retail REIT ($296m)
United Hamsphire REIT ($327m)
First REIT ($328m)
ARA Hospitality Trust ($380M)
Sabana REIT ($400M)

Note: Eagle Hospitality Trust is currently suspended

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 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 decreased at 0.98
- Decreased from 1.01 in January 2021.
- Singapore overall REIT sector is at about fair value now.
- Take note that NAV is adjusted downwards for most REITs due to drop in rental income. (Property valuation is done using DCF model or comparative model.)

TTM distribution yield increased to 5.68%
- Increased from 5.45% in January 2021.
- One-third of Singapore REITs (13 out of 39) 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, and post circuit-breaker recovery.
- Exclude Eagle Hospitality Trust due to suspension.

Gearing ratio at 37.44%.
- Reduce from 38.19% in January 2021.
- In general, Singapore REITs sector gearing ratio is healthy but 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.