Singapore REITs: 3 Red Flags to Check Before You Buy

The Smart Investor2022-10-17

Time flies and earnings season is almost upon us again.The usual practice is forREITsto report their results first followed by the trio of local banks.There is a change in the air, though.Investors ...

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Comments

Maxi10
2022-10-17
Maxi10
Nice read
Zash
2022-10-17
Zash
Interesting analyses
powerbert
2022-10-17
powerbert
I have no choice but to hold on to all my Reits shares, I don't want to sell at a big loss.
- powerbert:
  Yes, good idea, I am buying slowly at the moment.
- BGTAN:
  I will dca even more when the price drop. just ask yourself these questions. Is the interest rate hike a permanent or a temporary thing? Will it last for more than 3 years? I think this is a good time to add more position to reit with the recent price drop. it is an opportunity to get more dividend for the future.
VivianChua
2022-10-17
VivianChua
Will improve 💚
jllwang
2022-10-17
jllwang
Thanks for sharing
Rookie22
2022-10-17
Rookie22
MLT seem good 👍 👌 🤔

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href=https://thesmartinvestor.com.sg/singapore-reits-3-red-flags-to-check-before-you-buy/><strong>The Smart Investor</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Time flies and earnings season is almost upon us again.The usual practice is forREITsto report their results first followed by the trio of local banks.There is a change in the air, though.Investors ...</p>\n\n<a href=\"https://thesmartinvestor.com.sg/singapore-reits-3-red-flags-to-check-before-you-buy/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":null,"symbol_name":null,"start_time":0,"source_url":"https://thesmartinvestor.com.sg/singapore-reits-3-red-flags-to-check-before-you-buy/","article_id":"1129121473","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1129121473","pubTimestamp":1665971534,"sourceInfo":{"source_id":"lsy1602567310727","name":"The Smart Investor"},"weMediaInfo":null,"summary":"Time flies and earnings season is almost upon us again.The usual practice is forREITsto report their","collect":0,"end_time":0,"defaultTopTitle":"thesmartinvestor.com.sg","property":[],"viewcount":null,"language":"en","relate_stocks":{},"translate_title":"新加坡REITs：购买前要检查3个危险信号","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{},"content_text":"Time flies and earnings season is almost upon us again.The usual practice is forREITsto report their results first followed by the trio of local banks.There is a change in the air, though.Investors will be closely scrutinising this quarter’s REIT earnings amid an environment of high inflation and rising interest rates.The purpose is to assess if REITs may be adversely affected by these new economic developments.And if you are an income-seeking investor, you will be concerned about REITs’ ability to continue doling out distributions as costs increase.REITs are well-known for being reliable dividend payers, and investors are naturally concerned if this dependability may be disrupted.Here are three red flags you should watch out for when REITs report their results in the coming weeks.Debt metricsREITs are an asset class that relies heavily on borrowings to fund both their operations and acquisitions.Hence, it’s no surprise that interest rates have a significant bearing on REITs’ financial costs and, in turn, their distributable income.Investors need to look at each REIT’s debt metrics to assess how well it can cope with rising interest rates.First off, you need to look at the REIT’s cost of debt.A lower cost of debt ensures that the REIT has a bigger buffer in a rising interest rate environment.Take Mapletree Logistics Trust(SGX: M44U), or MLT.The logistics REIT sported a weighted average annualised cost of debt of 2.3% as of 30 June 2022.Parkway Life REIT(SGX: C2PU) boasts an even lower cost of borrowing with its all-in debt cost of just 0.61%.A REIT’s cost of debt has a lot to do with the foreign currency it can borrow in, and also whether it has a strong sponsor to assure banks that the REIT has a lower risk profile.Contrast this to China-based Sasseur REIT(SGX: CRPU) which has a weighted average cost of debt of 4.5%.Another important metric to look at is the proportion of fixed-rate debt within the REIT’s array of loans.The higher this component, the more buffer it has when it comes to rising finance costs.For MLT, 80% of its total debt is hedged or drawn in fixed rates.Suburban retail REIT Frasers Centrepoint Trust(SGX: J69U), or FCT, has 69% of its total loans on fixed rates, while retail and commercial REIT CapitaLand Integrated Commercial Trust(SGX: C38U), or CICT, has 81% of its borrowings tied to fixed interest rates.DPU sensitivityApart from debt metrics, REITs should also disclose the sensitivity of their distribution per unit (DPU) to the rise in base interest rates.By doing so, investors can assess the approximate impact on the REIT’s distributions each time rates go up.For CICT, every one percentage point rise in interest rates will lower DPU by S$0.0028.The decline represents 2.7% of CICT’s trailing 12-month DPU of S$0.1044.MLT estimates that a 0.25 percentage point increase in base interest rates will result in a S$0.0001 decline in DPU per quarter.The decline is 0.4% of its fiscal 2023’s first quarter DPU of S$0.02268.Frasers Logistics & Commercial Trust(SGX: BUOU) will witness a S$0.0005 fall in DPU for each 0.5 percentage point increase in interest rates for its variable rate loans.This drop works out to be around 0.6% of the REIT’s annualised fiscal 2022’s first-half DPU of S$0.0385.From the above examples, it’s easy to quantify the effects of rising interest rates on these REITs’ DPUs.Although the recent surge in interest rates will result in across-the-board falls in DPU, REITs have various methods to mitigate this decline.The impact of inflationThe third aspect to watch for is the effect of inflation on the operating expenses of the REIT.Common property operating expenses include utilities, property management fees, marketing expenses, maintenance costs, and staff salaries.There has already been news of a sharp jump in utility costs as electricity and gas expenses rose 23.9% year on year in August.Labour costs are also expected to rise as employees demand higher salaries to cope with food and transport inflation.These expenses will add up to reduce the distributable income for the REIT and is an area that investors should monitor in the coming quarters.","kind":null,"is_publish_news":false,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9989630337,"gmtCreate":1665981751429,"gmtModify":1676537687403,"author":{"id":"4107743831004210","authorId":"4107743831004210","name":"Maxi10","avatar":"https://static.itradeup.com/news/1c73e38352dc667169a3b7464adceae3","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4107743831004210","authorIdStr":"4107743831004210"},"htmlText":"Nice read","listText":"Nice read","text":"Nice read","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9989630337","repostId":1129121473,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9989609994,"gmtCreate":1665977410218,"gmtModify":1676537686681,"author":{"id":"4127542989705642","authorId":"4127542989705642","name":"Zash","avatar":"https://community-static.tradeup.com/news/511ffe833195a05166d3eac98cf7bffe","vip":1,"crmLevel":2,"crmLevelSwitch":1,"idStr":"4127542989705642","authorIdStr":"4127542989705642"},"htmlText":"Interesting analyses&nbsp;","listText":"Interesting analyses&nbsp;","text":"Interesting analyses","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9989609994","repostId":1129121473,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9989877438,"gmtCreate":1665977005924,"gmtModify":1676537686612,"author":{"id":"4093059271761650","authorId":"4093059271761650","name":"powerbert","avatar":"https://static.tigerbbs.com/58b4a4434d2d9949729ba54620260514","vip":1,"crmLevel":4,"crmLevelSwitch":1,"idStr":"4093059271761650","authorIdStr":"4093059271761650"},"htmlText":"I have no choice but to hold on to all my Reits shares, I don't want to sell at a big loss.&nbsp;","listText":"I have no choice but to hold on to all my Reits shares, I don't want to sell at a big loss.&nbsp;","text":"I have no choice but to hold on to all my Reits shares, I don't want to sell at a big loss.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":2,"repostSize":0,"link":"https://ttm.financial/post/9989877438","repostId":1129121473,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":104383310,"gmtCreate":1666001600014,"gmtModify":1666001603478,"authorId":4093059271761650,"author":{"id":4093059271761650,"idStr":"4093059271761650","authorId":4093059271761650,"name":"powerbert","avatar":"https://static.tigerbbs.com/58b4a4434d2d9949729ba54620260514","vip":1,"currentWearingBadge":{"badgeId":"972123088c9646f7b6091ae0662215be-2","templateUuid":"972123088c9646f7b6091ae0662215be","name":"Master Trader","description":"Total number of securities or futures transactions reached 100","bigImgUrl":"https://static.tigerbbs.com/ad22cfbe2d05aa393b18e9226e4b0307","smallImgUrl":"https://static.tigerbbs.com/36702e6ff3ffe46acafee66cc85273ca","grayImgUrl":"https://static.tigerbbs.com/d52eb88fa385cf5abe2616ed63781765","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2022.05.11","exceedPercentage":"80.13%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1100},"crmLevel":4,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9989877438,"type":1,"supId":104380973,"prevId":0,"content":"Yes, good idea, I am buying slowly at the moment.","text":"Yes, good idea, I am buying slowly at the moment.","html":"Yes, good idea, I am buying slowly at the moment."},{"id":104380973,"gmtCreate":1665984033422,"gmtModify":1665984037390,"authorId":3578630064980119,"author":{"id":3578630064980119,"idStr":"3578630064980119","authorId":3578630064980119,"name":"BGTAN","avatar":"https://static.tigerbbs.com/8ca7305b1f6bd1d4dd9abf3c54e6fbdb","vip":1,"currentWearingBadge":{"badgeId":"972123088c9646f7b6091ae0662215be-2","templateUuid":"972123088c9646f7b6091ae0662215be","name":"Master Trader","description":"Total number of securities or futures transactions reached 100","bigImgUrl":"https://static.tigerbbs.com/ad22cfbe2d05aa393b18e9226e4b0307","smallImgUrl":"https://static.tigerbbs.com/36702e6ff3ffe46acafee66cc85273ca","grayImgUrl":"https://static.tigerbbs.com/d52eb88fa385cf5abe2616ed63781765","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2022.05.10","exceedPercentage":"80.86%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1100},"crmLevel":3,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9989877438,"type":1,"supId":0,"prevId":0,"content":"I will dca even more when the price drop. just ask yourself these questions. Is the interest rate hike a permanent or a temporary thing? Will it last for more than 3 years? I think this is a good time to add more position to reit with the recent price drop. it is an opportunity to get more dividend for the future.","text":"I will dca even more when the price drop. just ask yourself these questions. Is the interest rate hike a permanent or a temporary thing? Will it last for more than 3 years? I think this is a good time to add more position to reit with the recent price drop. it is an opportunity to get more dividend for the future.","html":"I will dca even more when the price drop. just ask yourself these questions. Is the interest rate hike a permanent or a temporary thing? Will it last for more than 3 years? I think this is a good time to add more position to reit with the recent price drop. it is an opportunity to get more dividend for the future."}],"langContent":"EN"},{"id":9989872788,"gmtCreate":1665976430345,"gmtModify":1676537686515,"author":{"id":"3580011914778910","authorId":"3580011914778910","name":"VivianChua","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":5,"crmLevelSwitch":1,"idStr":"3580011914778910","authorIdStr":"3580011914778910"},"htmlText":"Will improve 💚&nbsp;","listText":"Will improve 💚&nbsp;","text":"Will improve 💚","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9989872788","repostId":1129121473,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9989846477,"gmtCreate":1665974730499,"gmtModify":1676537686006,"author":{"id":"3567745604737709","authorId":"3567745604737709","name":"jllwang","avatar":"https://static.tigerbbs.com/366d7ae96d4681048d49130306d50c5d","vip":1,"crmLevel":8,"crmLevelSwitch":0,"idStr":"3567745604737709","authorIdStr":"3567745604737709"},"htmlText":"Thanks for sharing","listText":"Thanks for sharing","text":"Thanks for sharing","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9989846477","repostId":1129121473,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9989849359,"gmtCreate":1665973931372,"gmtModify":1676537685832,"author":{"id":"3575290973507485","authorId":"3575290973507485","name":"Rookie22","avatar":"https://static.tigerbbs.com/c6852efd5f87d9ecf7965e213c38ac97","vip":1,"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":4,"crmLevelSwitch":1,"idStr":"3575290973507485","authorIdStr":"3575290973507485"},"htmlText":"MLT seem good 👍 👌 🤔&nbsp;","listText":"MLT seem good 👍 👌 🤔&nbsp;","text":"MLT seem good 👍 👌 🤔","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9989849359","repostId":1129121473,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":156,"commentSize":14,"repostSize":0,"favoriteSize":3,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1129121473"}