To The Moon

Technical Analysis of FTSE ST REIT Index (FSTAS351020)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased from 723.18 to 725.07 (0.26%) compared tolast month’s update. The REIT Index has rebounded from the sell-off in September and October and since early November has been within the range of 714 and 742. It has been moving sideways for the past 2 months. This is a typical flag pattern after a strong move.

• Short-term direction:Sideways (20D SMA is moving sideways)
• Medium-term direction:Sideways (50D SMA is moving sideways)
• Long-term directionDown (200D SMA is sloping down)
• Immediate Support at 714
• Immediate Resistance at 742

Fundamental Analysis of 38 Singapore REITs

The following is the compilation of 38 Singapore REITs with colour-coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio.

Price/NAV Ratios Overview

• Price/NAV remained at 0.80.
• Remained at 0.80 since December 2022.
• There has been a recent sell-off in September-October period.
• Singapore Overall REIT sector is undervalued now.
• Take note that NAV is adjusted upwards for some REITs due to pandemic recovery.

• Most overvalued REITs (based on Price/NAV)
• Parkway Life REIT (Price/NAV = 1.58)
• Keppel DC REIT (Price/NAV = 1.29)
• Capitaland Ascendas REIT (Price/NAV = 1.15)
• Mapletree Industrial Trust (Price/NAV = 1.15)
• Mapletree Logistics Trust (Price/NAV = 1.09)
• ESR-LOGOS REIT (Price/NAV = 1.01)
• Only 6 REITs are overvalued now based on Price/NAV value.
• No change in the Top 2 compared to the past 2 months.

• Most undervalued REITs (based on Price/NAV)
• Lippo Malls Indonesia Retail Trust (Price/NAV=0.34)
• Prime US REIT (Price/NAV = 0.47)
• ARA US Hospitality Trust (Price/NAV = 0.49)
• Manulife US REIT (Price/NAV = 0.55)
• Keppel Pacific Oak US REIT (Price/NAV = 0.55)
• EC World REIT (Price/NAV = 0.56)

Distribution Yields Overview

• TTM Distribution Yieldincreased to 7.90%.
• Increased from 7.67% in December 2022.
• 19 of 40 Singapore REITs 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 economic recovery. The recent sell-off contributed to the increase in average yield.
• 9 REITs have a ttm yield of over 10%!

• Highest Distribution Yield REITs (ttm)
• Manulife US REIT (17.67%)
• Prime US REIT (17.21%)
• Keppel Pacific Oak US REIT (13.48%)
• United Hampshire US REIT (12.82%)
• EC World REIT (12.74%)
• Lippo Malls Indonesia Retail Trust (12.00%)
• Reminder 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.
• A High Yieldshould notbe the sole ratio to look for when choosing a REIT to invest in.
• Yield Spread widened to 4.69%.
• Widened slightly from 4.61% in December 2022.

Gearing Ratios Overview

• Gearing Ratioincreased to37.20%.
• Increased from 37.03% from December 2022.
• Gearing Ratios are updated quarterly. Only Manulife US REIT have anupdated gearing ratio value in the past month.

• Highest Gearing Ratio REITs
• Manulife US REIT (49.0%)
• Lippo Malls Indonesia Retail Trust (43.7%)
• ARA Hospitality Trust (43.3%)
• Suntec REIT (43.1%)
• United Hampshire US REIT (42.1%)
• Elite Commercial REIT (41.9%)

Market Capitalisation Overview

• Total Singapore REIT Market Capitalisation increased by 0.26%to S$95.36 Billion.
• Increased from S$95.11 Billion in December 2022.

• Biggest Market Capitalisation REITs:
• Capitaland Integrated Commercial Trust ($13.52B)
• Capitaland Ascendas REIT ($11.51B)
• Mapletree Pan Asia Commercial Trust ($8.74B)
• Mapletree Logistics Trust ($7.64B)
• Mapletree Industrial Trust ($6.00B)
• Frasers Logistics & Commercial Trust ($4.31B)
• No change in the rankings since September 2022.

• Smallest Market Capitalisation REITs:
• Lippo Malls Indonesia Retail Trust ($231M)
• BHG Retail REIT ($257M)
• ARA Hospitality Trust ($267M)
• United Hampshire US REIT ($349M)
• EC World REIT ($360M)
• Elite Commercial REIT ($365M)
• No change in the top 3 rankings from last 2 month’s update.

Top 20 Worst Performers of the Month in December 2022

 (Source:https://stocks.cafe/kenny/advanced)

SG 10 Year & US 10 Year Government Bond Yield

• SG 10 Year: 3.11% (increased from 3.00%)
• US 10 Year: 3.88% (increased from 3.49%)

Major REIT News in December 2022

Hong Kong’s Link Real Estate Investment Trust (REIT) enters Singapore market

CNA: Hong Kong-listed Link Real Estate Investment Trust (REIT) is buying a portfolio of Singapore shopping malls for S$2.16 billion (US$1.6 billion) from Mercatus Co-operative in its first foray into the country. The deal is for the acquisition of suburban retail assets Jurong Point and Swing By @ Thomson Plaza, along with a 10-year asset and property management service agreement for a third suburban mall, AMK Hub, which will remain under the ownership of Mercatus, Link REIT said in a stock exchange filing on Wednesday (Dec 28).

“This transaction allows us to build a dedicated team in Singapore and provides a base for Link to expand further into other asset classes and strategies in Asia Pacific,” Link CEO George Hongchoy said in a statement. Link, Asia’s biggest REIT, said it will fully fund the purchase through cash and debt, adding that it is in active discussions with investors and open to bringing in capital partners.

The announcement confirms a Reuters report in November that cited sources saying Link REIT was the frontrunner to buy the assets from Mercatus, a unit of Singapore shopping mall owner NTUC Enterprise Co-operative, in what would be Southeast Asia’s biggest real estate transaction of 2022. Read More

SPH REIT renames to Paragon REIT from January 3rd, 2023

THE BUSINESS TIMES: SPH Real Estate Investment Trust (Reit)will be renamed to Paragon Reit as the name change will better reflect the trust’s vision and mission to capture unique opportunities in the Asia-Pacific retail landscape, the Reit manager said on Thursday (Dec 29). The names of its security, counter and manager – along with the Reit’s logo and website – will reflect the new name with effect from 9 am on Jan 3, 2023. The Reit manager added that the trust will be “bolstered by the deep real estate sector knowledge and strong relationships” of its sponsor, Cuscaden Peak Investments.

Cuscaden Peak Investments was formerly known as Singapore Press Holdings, and is a wholly-owned subsidiary of Cuscaden Peak. Cuscaden Peak is a consortium comprising tycoon Ong Beng Seng’s Hotel Properties Limited, and Temasek-linked CLA Real Estate Holdings and Mapletree. The Reit’s existing counter code – “SK6U” – on the Singapore Exchange will remain unchanged.

It will also continue to be led by the current management team, retain its investment mandate, and manage its existing portfolio of assets.Read More

Summary

Fundamentally, the whole Singapore REITs landscape remains very undervalued based on the average Price/NAV (at 0.80) value of the S-REITs, which is quite rare that S-REIT is trading at such huge discount with a very attractive DPU yield of 7.90%! This is even higher than that of last month. Below is the market cap heat map for the past 1 month.

Interestingly, despite 24 REITs being bearish and only 10 REITs being bullish in the past month, market cap overall has increased very slightly by 0.26%. This is due to larger market cap REITs doing well (eg. Capitaland Ascott Trust (S$3.5B,11.11%), ESR-LOGOS REIT (S$2.5B, 7.25%), Frasers Centrepoint Trust (S$3.6B, 3.45%).Only 3 of the bottom 12 performing REITs have market capitalisations of over S$1B. The top 5 largest Market Cap REITs have performances varying between -0.45% and -2.34%.

Yield spread (in reference to the 10-year Singapore government bond yield of 3.11% as of 30th December 2022) widened from 4.61% to 4.69%.This is a slight increase of 0.08% due to the share price erosion outpaces in the increase of the risk-free rate.

Technically, FTSE ST REIT Index is trading in a bearish territory but rebounded strongly from the support level. The index is forming a flag pattern (either bull flag or bear flag) and future direction is unknown until the breakout. Breaking up from the flag pattern shows the continuation of the bullish rebound. However, breaking down from the flag pattern indicates the previous rebound is just a dead cat bounce and the REIT index may crash down to test the support of 665 level. Based on the current overall S-REIT P/NAV of 0.80 and the potential peaking of interest rate in Q2/Q3 2023, the probability to have a severe crash in S-REIT is low unless we are entering into severe recession with big drop in DPU and US Fed continues to increase the interest rate fiercely beyond 5%.

Kenny Loh is an Associate Wealth Advisory Directorand 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, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair. You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement