Singapore Real Estate Investment Trusts ( S-Reits ) theoretically is a defensive stock backing by their physical assets and high dividend yield ( higher than dividend yield of STI on average ). A Reits company functions by acquiring assets and lease out the assets to collect rental income from tenants. In return, at least 80% of the rental income collected is distributed back to the unitholder ( same as shareholder ) as dividend ( known as distribution per unit, DPU ). S-Reits is further classified into sector category. Namely, Retail, Residential, Office Space, Industrial, Healthcare, etc. Normal Reits investors are those risk adverse type who looking at constant income per annually ( dividend yield ) rather than looking at the price appreciation component of the stock price. Like any other investment, there is risk in investing in Reits too. Once the fundamental of the Reits changes, the risk will increase. The change in fundamental to the worse appears when the Reits company loosing its physical assets through possible natural disasters, political reason or bankruptcy, etc.
To invest in Reits, one should not just look at its dividend yield ( high doesn't mean good though ). One has to look at the followings :-
1. quality of the physical assets ( will it be affected by bad economic times like no tenants etc, FA valuation is looking at its NAV )
2. company cashflow ( strong cashflow means no need to borrow from banks to acquire assets to grow their portfolio )
3. ability to grow its physical assets ( that is acquiring more to boost better rental income )
4. gearing ratio ( debt-to-asset ratio, the lower the better )
5. dividend yield
The problem for most Reits now is refinancing problem. During the good ecomoy times they have borrowed from banks to acquire assets at reasonable "high price" and now with economy bad times coming, they are facing the problem of possible decrease in rental income and hence difficulty in repaying the loan.
Below is the list of some of the better quality Reits in SG Market.
CapitaMall Trust
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NAV = $2.21
Gearing = 43.3%
DPU estimate = 14.48 cents
Price ( 21st Nov 08 ) = $1.55
Yield = 9.34%
Ascendasreit
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NAV = $1.85
Gearing = 41.4%
DPU estimate = 16.04 cents
Price ( 21st Nov 08 ) = $1.27
Yield = 12.63%
CapitaComm Trust
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NAV = $3.11
Gearing = 36.3%
DPU estimate = 10.60 cents
Price (21st Nov 08 ) = $0.795
Yield = 13.33%
CDL Hospitality Trust
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NAV = $1.57
Gearing = 18.1%
DPU estimate = 11.75 cents
Price (21st Nov 08) = $0.635
Yield = 18.50%
Mapletreelog Trust
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NAV = $0.85
Gearing = 36.9%
DPU estimate = 8.16 cents
Price (21st Nov 08) = $0.34
Yield = 24.00%
ParkwayLife Reit
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NAV = $1.34
Gearing = 19.60%
DPU estimate = 6.66 cents
Price (21st Nov 08) = $0.800
Yield = 8.33%
Suntec Reit
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NAV = $2.23
Gearing = 31.9%
DPU estimate = 11.35 cents
Price (21st Nov 08) = $0.630
Yield = 18.02%
For a detail listing of all the S-Reits information, the following site provides a good reference.
SGX - REIT - DATA
