As the second-largest economy in the world, investors cannot afford to ignore China in our investment portfolio. For REIT investors in Singapore, there also 5 China-focused REITs listed on the SGX – CapitaLand China Trust; BHG Retail REIT; Dasin Retail Trust; EC World REIT; Sasseur REIT.
However, there are several things we need to consider when investing in China-focused REITs. First, there has been increasing uncertainty over loan refinancing – as reported by both Dasin Retail Trust in December 2021 and EC World REIT more recently.
Like most businesses, REITs were severely affected by the COVID-19 pandemic. Even as global economies are well into their re-opening strategy today, China is still pursuing a zero-COVID policy – which will continue to impact various REITs in China.
The COVID-19 pandemic has also led to heightened inflation. First, disrupting supply chain and then having to catch up with pent-up demand as economies reopen. Russia’s invasion of Ukraine has also contributed to rising inflation concern in the world. In a bid to fight inflation, central banks globally are looking to increase interest rates. This may pressure REITs even further as the cost of borrowing goes up. At the same time, the corresponding economic growth, that usually follows higher interest rates, may not be as strong.
We look more closely at the 5 China-focused S-REITs.
CapitaLand China Trust (SGX: AU8U)
With a market capitalisation of over $2 billion, CapitaLand China Trust or CLCT is the largest China-focused REIT listed in Singapore. The REIT owns 11 shopping malls, 5 business parks and 4 logistics parks across 12 leading Chinese cities, including Beijing, Shanghai, Chengdu, and Suzhou.
CapitaLand China Trust was formerly only a retail-centric REIT. Since 2020, it has expanded its property portfolio to include business parks and logistics parks as well.
In its latest FY2021 results, CLCT reported an 80% increase in Net Property Income (NPI) to RMB1.2 billion. This was a result of both better results for its existing property portfolio, which had been impacted by COVID-19 as well as new contributions from the business parks and logistics parks it had acquired. Its distribution per unit (DPU) also increased 40% to $0.0873.
In the year-to-date (YTD), CLCT’s unit price has remained consistent. Its DPU yield is close to 7.3%.
BHG Retail REIT (SGX: BMGU)
BHG Retail REIT has a market capitalisation of $282 million, owning six retail properties in major Chinese cities, namely Beijing, Chengdu, Hefei, Xining and Dalian.
In its latest FY2021 results, it announced a 15% increase in NPI to $42 million. This was a result of higher portfolio occupancy to 97%. During the latest financial year, its DPU rose 17% as well.
In 2022 so far, its share price has shaved about 10% of its value. BHG Retail REIT is currently trading at a dividend yield of about 4.0%.
Dasin Retail Trust (SGX: CEDU)
Dasin Retail Trust’s property portfolio comprises seven retail malls in Zhongshan, Zhuhai and Foshan cities in Guangdong. Currently, Dasin Retail Trust has a market capitalisation of $246 million.
In its most recent FY2021 results announcement, it reported an 11% increase in its NPI, driven by improving consumer sentiments in China. Correspondingly, its DPU rose nearly 63% to $0.0467.
In YTD 2022, its shares have dipped more than 16% to $0.31. Currently, Dasin Retail Trust is trading at a dividend yield of about 12.0%.
EC World REIT (SGX: BWCU)
EC World REIT has a portfolio comprising eight logistics properties in e-commerce clusters in Hangzhou and Wuhan. Its market capitalisation is over $530 million.
Its latest financial statement highlighted “a material uncertainty related to the ability of EC World REIT to continue as a going concern”. This was due to the incomplete refinancing related to loans that are coming due in mid-2022. However, the Board recently stated that it no longer “believe that there is an issue with EC World REIT’s ability to continue operating as a going concern at this juncture”. This is because EC World REIT is already in the final stages of negotiating their refinancing package.
In its latest FY 2021 results announcement, EC World REIT’s NPI increased 13% to $113 million. This was mainly because there was no rental rebates given in FY2021, compared to FY2020. Its DPU increased to $0.06263 – which is 17% higher than FY2020.
Since the start of 2022, EC World REIT’s shares have decreased nearly 15% to $0.655. Its dividend yield is 9.6%.
Sasseur REIT (SGX: CRPU)
Sasseur REIT owns a portfolio of four outlet malls in Chongqing, Kunming and Hefei, China. Its market capitalisation is $1.0 billion, making it the second-largest China-focused S-REIT.
In its FY2021 results, its rental income amounted to $127.5 million, about 10% higher than FY2020. Its DPU also rose 8.5% to $0.07104.
In YTD 2022, Sasseur REIT’s share price has dipped about 1% to $0.835. Resultantly, it is trading at a dividend yield of 9%.
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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.