According to the FTSE ST Real Estate Investment Trust (REIT) Index, the REIT market in Singapore has grown by 8.38% year-to-date (YTD), offering both capital appreciation as well as high-yield opportunities. However, it’s possible that the market may have missed out on some REITs with growth catalysts that could have driven its valuations higher.
This week, we take a closer look at four REITs that have low price-book ratio and possible upside catalysts, namely Ascott Residence Trust, Sasseur Real Estate Investment Trust, Starhill Global Real Estate Investment Trust and Far East Hospitality Trust.
Ascott Residence Trust (SGX: A68U)
Ascott REIT is the largest hospitality REIT in Singapore, with an investment portfolio comprising of serviced residences and rental housing properties. In FY2018, its revenue and gross profit has increased year-on-year (YOY) by 4% (S$496.3m to S$514.3m) and 5% (S$226.9m to S$239.4m) respectively, as a result of additional contributions from acquisitions made in FY2017. Unitholders’ distribution is also at an all-time high at S$154.8 million, a 2% increase from FY2017.
Looking ahead, the management has alluded that the trust will be focused on acquisitions in Australia, Europe and US to increase its exposure in developed markets. Closer to home, Ascott has recently acquired a prime greenfield site at Singapore’s research and innovation business hub one-north to develop a co-living property, lyf one-north Singapore, which is slated to open in 2021.
Sasseur Real Estate Investment Trust (SGX: CRPU)
Sasseur REIT is the first outlet mall REIT to be listed in Singapore, comprising of 4 retail outlet malls located in Chongqing, Bishan, Hefei and Kunming. For FY2018, Sasseur REIT’s 8.4% annualised distribution yield has exceeded its 7.4% forecast yield based on IPO price. Given the booming Chinese outlet mall industry, the four malls have generated a combined sales of RMB 3.4billion for FY2018, exceeding the IPO forecast by 7.9%.
At the same time, Sasseur REIT continues to look at yield-accretive acquisition opportunities, with a preference for projects in China. There is also potential for Sasseur to acquire its sponsor’s property pipeline which has expanded from 3 to 7 with additions in Changsha, Lanzhou, Yangzhou and Shenzhen.
That said, it’s worth noting that since the REIT’s assets are all located in China, investors are exposed to the risk of foreign exchange rate.
Starhill Global Real Estate Investment Trust (SGX: P40U)
Starhill Global REIT is a Singapore-based real estate investment trust investing primarily in real estate for retail and office purposes in the Asia Pacific region. For 2Q2018, net property income (NPI) for Singapore decreased by 2.3% YOY to S$25.1 million, mainly due to a decline in retail revenue from Wisma Atria. The depreciation of the Australian dollar against the Singapore dollar and higher operating expenses have also reduced its Australia’s NPI to S$6.9 million, 5.9% lower than the previous year.
Moving forward, while the retail sector continues to face headwinds due to weak consumer sentiment and an oversupply of retail space island wide, initiatives by the Singapore government through URA, STB and NParks to revamp Orchard Road into a lifestyle destination will be beneficial to Starhill Global REIT.
In Malaysia, the Manager is evaluating the master tenancy renewal proposal for its Properties, which includes an asset enhancement initiative for Starhill Gallery to enhance the income of the mall.
Far East Hospitality Trust (SGX: Q5T)
Far East Hospitality Trust (FEHT) is the first and only Singapore-focused hotel and serviced residence hospitality trust listed on in the Singapore Exchange, with currently 9 hotels and 4 serviced residences valued at approximately S$2.63 billion.
For FY2018, the gross revenue was 12.4% YOY higher at S$28.9 million, with 4 consecutive quarters of YOY growth in dividend per share (DPS). In addition, the announcement by SMS for Trade and Industry Chee Hong Tat, regarding the rebranding of Sentosa, along with Pulau Brani, as the Southern Gateway of Asia, will benefit FEHT’s 3 new hotels in Sentosa due to open from next month.
|Ascott Residence Trust||S$1.15||19.062||6.22%||0.819|
|Sasseur Real Estate Investment Trust||S$0.725||3.848||9.37%||0.802|
|Starhill Global Real Estate Investment Trust||S$0.700||14.954||6.37%||0.777|
|Far East Hospitality Trust||S$0.650||13.156||6.15%||0.739|
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