The Top 3 Yielding REITs in Singapore Now
- Original Post from The Motley Fool Sg

Last month, investors in Singapore saw one of the steepest sell-offs of a real estate investment trust (REIT) in recent memory.


First Real Estate Investment Trust (SGX: AW9U) slid more than 10% in just two days as reports about the financial health of its main tenant, Lippo Karawaci Tbk PT spooked investors.


REITs are often considered more stable investments than stocks because their rental income is usually more consistent and they tend to have fewer business risks than traditional companies. Because of these reasons, a large decline in a REIT’s unit price, such as First REIT’s, is a rare occurrence.


That being said, the decline in price now means that investors who are willing to take some risks with First REIT can buy in at a much lower price. As the yield of a REIT is a function of its price, it also means that investors who buy now will also enjoy a much higher distribution yield than if they had bought it just a week earlier. First REIT now sports the fifth highest yield among REITs in Singapore.


With that in mind, I thought it would be useful to give investors a list of the top three REITs with the highest year-to-date annualised yields in Singapore.



Lippo Malls Indonesia Retail Trust (SGX: D5IU)


Top on the list is another REIT that is linked to Lippo Karawaci. Like First REIT, Lippo Malls Indonesia Retail Trust has fallen hard in recent months. Year-to-date, the REIT has shed more than 40% of its value amid concerns over its sponsor.


The falling Indonesian Rupiah has not helped either and is another factor that has caused distributions to be lower for local investors.


Lippo Malls Indonesia Retail Trust currently has an annualised yield of 12%.



Cache Logistics Trust (SGX: K2LU)


With an annualised yield of 9%, Cache Logistics Trust comes in at second place. It invests primarily in logistics warehouse properties located in Singapore, Australia, and China.


The trust has been suffering from higher foreign exchange losses this year, largely due to the weaker Australian dollar. Consequently, its net income has slid 7.1% between January to September this year, compared to last year. Its distribution per unit has also declined 12%, which has resulted in its unit price falling almost 20% so far this year.



EC World Real Estate Investment Trust (SGX: BWCU)


Third on this list is EC World REIT with its annualised yield of 8.8%. It invests in specialised and e-commerce logistics properties in China. So far this year, the REIT has been doing well with gross revenue and distributable income up 2.9% and 3.0% respectively. It made its first acquisition last year, expanding its property count to seven, which was part of the reason for the improved performance this year.


The Foolish bottom line


Fears of rising interest rate and geopolitical risk have caused a broad market sell-off this year. The falling stock market has resulted in REITs in Singapore currently sporting much higher yields than they did last year.


That being said, the yield of a REIT is not the only aspect that investors should look out for. What is perhaps more important is the stability of distributions and whether the REIT can grow over time. Investors should consider things like concentration risk, gearing, and interest cover when assessing the stability and growth potential of a REIT.


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OUE Commercial REIT’s First-Quarter Results: Quick Take
- Original Post from The Motley Fool Sg

OUE Commercial Real Estate Investment Trust (SGX: TS0U) released its first-quarter results for 2019 this week. Here’s a quick look at how it performed, key portfolio statistics and what’s in store for the future.


Operating results


Although revenue and net property income increased by 25.5% and 23.5% respectively, distribution per unit (DPU) declined by 19.6%. The higher revenue and net property income were due to the contribution from OUE Downtown Office, which was acquired on 1 November 2018.


However, DPU dipped due to a larger unit base following the rights issue used to fund the acquisition, as well as higher finance costs this quarter. Interest expenses rose 35.8% from the corresponding quarter last year due to the higher loan volume used to finance part of the acquisition.


Balance sheet


Debt remains relatively high, with the debt-to-asset ratio standing around 39.4%. In Singapore, the regulatory ceiling for REITs is 45%. Its interest expenses are also relatively high compared to its earnings, with the interest service ratio standing at 3.3 times. The interest service ratio is calculated by dividing the REIT’s income by its interest expense.


The higher the interest service ratio, the more easily a REIT can pay off its financial obligations. In my books, I like to see REITs that have an interest service ratio of above 5.


On a brighter note, OUE Commercial REIT has only S$5 million of debt maturing this year.



Source: OUE Commercial REIT 2019 Q1 Earnings Presentation


Portfolio statistics


Its portfolio’s committed occupancy was 94.0% as of 31 March 2019. Rental reversions in its Singapore properties were positive in the reporting quarter, which should improve rental income down the road.


The trust’s portfolio weighted average lease term to expiry was 2.3 years by gross rental income while 14.9% of its leases are due for renewal this year.


Most notably, One Raffles Place, has 43.1% of gross rental income up for renewal in 2019 and 2020, with expiring rents below current market rates. This should provide further upside potential for the REIT.


Outlook and valuation


According to CBRE, Grade A CBD core office rents in Singapore rose 3.2% from the previous quarter, marking the seventh consecutive quarter of growth, and represents a 24.6% increase from the trough in 2017.


Management said in its presentation slides, “Given the benign medium-term supply outlook and the narrowing of the gap between market rents and expiring rents in OUE C-REIT’s Singapore properties, we continue to expect positive operational performance in 2019.”


However, in Shanghai, significant new supply and softer demand from a slower economy mean rental growth is expected to be subdued in the near term.


At the time of writing, OUE Commercial REIT units trade at S$0.505 apiece. This translates to a price-to-book ratio of 0.595 and a distribution yield of 5.9%.



Maximise dividends on your REITs with our brand-new Complete Guide To Buying The Best Singapore REITs. We reveal everything we think you need to know about finding the best REITs that hands you a fat dividend cheque ...even if you have no REITs experience at all! Get instant access to your 100% FREE, actionable, 42-page PDF guide here.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.


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5 Takeaways from Keppel DC REIT’s 2019 First-Quarter Earnings
- Original Post from The Motley Fool Sg

Keppel DC REIT (SGX: AJBU) released its 2019 first-quarter earnings update yesterday evening. The REIT currently owns 15 data centres across eight countries that are worth a total of S$2 billion as of 31 March 2019.


Here are eight key takeaways from Keppel DC REIT’s latest earnings update:


1. Gross revenue for 2019’s first-quarter continued to show good growth, rising by 26.4% year on year to S$48.0 million. This was due to contributions from the acquisitions of Maincubes Data Centre in Offenbach am Main, Germany, as well as Keppel DC Singapore 5, in 2018. Property expenses rose by 22.5%, resulting in net property income registering growth of 26.8% to S$43.2 million. Distribution income and distribution per unit (DPU) for the reporting quarter rose by 30% and 6.7%, respectively, to S$27.1 million and 1.92 Singapore cents. Keppel DC REIT’s unit price closed at S$1.49 on 15 April 2019; at that price, the REIT has an annualised distribution yield of 5.2%.


2. Keppel DC REIT’s property portfolio is worth S$2 billion at the end of 2019’s first-quarter, of which the bulk, 51%, is in Singapore. Total exposure to Asia is 67.4%, while the remaining 32.6% is in Europe (see the portfolio breakdown below). The REIT’s occupancy rate rose slightly from 93.1% in the previous sequential quarter to 93.2%, but the weighted average lease expiry (WALE) declined from 8.3 years to 8.0 years.




Source: Keppel DC REIT 2019 first-quarter earnings presentation


3. The REIT is performing enhancement works to three of its assets at the moment:


a) At Keppel DC Singapore 3, retrofitting works are under way to cater for a client’s expansion, and completion is expected in mid-2019.

b) At Keppel DC Dublin 1, asset enhancement works are ongoing to improve energy efficiency, and completion is expected in 2020.

c) At Keppel DC Dublin 2, the REIT is carrying out power upgrade and fit-out works for client expansion, and completion is expected in the second half of 2019.


4. Aggregate leverage for the REIT has inched up slightly from 30.8% in the fourth quarter of 2018 to 32.5% in the reporting quarter, due to higher gross borrowings. This still leaves considerable room for the REIT to borrow more for acquisitions as its leverage is below the regulatory gearing-ceiling of 45%. During 2019’s first-quarter, Keppel DC REIT issued €50 million worth of 7-year floating rate notes that will come due in 2026. This debt-issue lowered Keppel DC REIT’s cost of debt from 1.9% in the previous sequential quarter to 1.7%, and increased the average debt tenor from 3 years to 3.3 years. The REIT’s interest coverage ratio also improved from 11.4 times to 12.9 times.


5. Keppel DC REIT shared that total mobile data traffic is expected to increase by 31% annually to reach 136 exabytes per month by the end of 2024. Mordor Intelligence also expects the cloud gaming market to grow at 15% per year between 2018 and 2023. These two trends alone bode well for the demand for data centres to grow steadily over the medium term at least, which will underpin growth for the REIT.


Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!


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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Keppel DC REIT.


The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing does not own shares in any of the companies mentioned.


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First Real Estate Investment Trust’s 2019 First-Quarter Earnings: What Investors Should Know
- Original Post from The Motley Fool Sg

First Real Estate Investment Trust (SGX: AW9U) is Singapore’s first healthcare real estate investment trust (REIT). The REIT currently owns 20 properties located in Indonesia, Singapore and South Korea.


On Wednesday, the healthcare REIT announced its financial results for the first quarter ended 31 March 2019. Let’s take a look at its latest performance.


Financial highlights


Gross revenue for the reporting quarter came in at S$28.6 million, a slight fall of 0.2% from S$28.7 million a year ago. The decline was largely due to a lower variable rental component for its Indonesia properties.


Property operating costs ballooned 114.8% to S$623,000 on the back of “higher property expenses incurred for Sarang Hospital and Indonesia properties”. Sarang Hospital is in South Korea and is managed by a private doctor. With the higher property operating expenses, net property income fell 1.4% to S$28.0 million.


The distributable amount, however, inched up by 0.9% to S$17.1 million while distribution per unit (DPU) was flat at 2.15 Singapore cents. The following chart shows distributable amount and DPU changes since the first quarter of 2013:Source: First Real Estate Investment Trust 2019 first-quarter earnings presentation


Balance sheet strength


As of 31 March 2019, First REIT’s gearing was 34.5%, below the regulatory limit of 45%. The REIT’s weighted average debt maturity stood at 2.16 years, with the debt maturity profile well-spread out.Source: First Real Estate Investment Trust 2019 first-quarter earnings presentation


Details of refinancing have been finalised for the S$100 million term loan facility due this year, and First REIT’s manager is awaiting approval from the relevant banks.


The REIT’s net asset value per unit dropped from S$1.0251 at the end of last year to S$1.0227 as of 31 March 2019.


Looking ahead


As for its growth plans, Victor Tan, chief executive of Bowsprit, First REIT’s manager, said:


“Going forward, the Trust will continue to explore opportunities to unlock the value of our existing portfolio through asset enhancement initiatives or strategic divestment of assets for capital gains. With OUE Limited (“OUE”) and OUE Lippo Healthcare Limited (“OUELH”) on board, we will also look at diversifying our income streams by expanding into other geographical markets.”


OUE Lippo Healthcare Ltd (SGX: 5WA) and OUE Ltd (SGX: LJ3) together acquired a 100% stake in Bowsprit. With that, OUE Lippo Healthcare joined PT Lippo Karawaci Tbk as First REIT’s co-sponsor.


First REIT’s units are currently selling at S$0.99 each. At that price, the REIT is going at a price-to-book ratio of 0.97 and a distribution yield of 8.7%.


Maximise dividends on your REITs with our brand-new Complete Guide To Buying The Best Singapore REITs. We reveal everything we think you need to know about finding the best REITs that hands you a fat dividend cheque ...even if you have no REITs experience at all! Get instant access to your 100% FREE, actionable, 42-page PDF guide here.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of First Real Estate Investment Trust. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.


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Is the First-Mover Advantage Really Beneficial for a Company?
- Original Post from The Motley Fool Sg

We often hear stories of smart and enterprising entrepreneurs who dip their toes into a new industry or technology. These pioneers spearhead the development of new ways of doing things or solving old problems. Such entrepreneurs are lauded for their vision and bravery in venturing into an untapped domain, and they’re also given lots of credit for stepping into areas where others may have feared to tread.


This got me thinking about a fundamental question in investing: Does the first-mover in any industry always end up being the winner and the dominant player? Or are there cases where a nascent industry has seen other players overtake the initial first-mover in order to gain the upper hand?


The first-mover “disadvantage”


While first-movers normally have a distinct advantage in a new and nascent industry, such companies also face many obstacles. A key problem is often the lack of understanding of its customer base and size of the customer pool if the industry is still new and the product not yet fully embraced by the general public.


Another problem might be the costs and expenses involved in building up infrastructure or systems to standardise processes or protocols within the new industry. Often, the first-mover has to come up with quality standards, rules, and regulations in order for the industry to thrive. Not having any or many competitors is a boon in terms of capturing market share, but it may not always lead to good profitability as there is a lot of spending required for research and development, compliance, and marketing surveys and studies.


The second-mover advantage


Businesses that move in after the first-mover has established itself are often still able to capture a sizeable customer base and attain decent market share, assuming it is a credible player with the knowledge and financial muscle to succeed. The advantage for the No. 2 entrant is that it would have witnessed the mistakes and stumbles the first-mover made and be better equipped to avoid them.


This provides the second-mover with an advantage the first-mover didn’t have: The customer base is now more well-established, there is growing acceptance of the new product or service, and the regulatory and quality standards have been firmed up.


The Foolish takeaway


To summarise, the first-mover may gain a strong advantage by being the first in line to market a product or service, but investors should note that there are also disadvantages to being the first. There are cases where the second (or even third) entrant into a new industry flourishes and goes on to do better than the first company. Therefore, investors might want to adopt a wait-and-see attitude before putting their money down in order to better understand the competitive dynamics of the new industry first.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.


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Cache Logistics Trust’s Latest Result: Higher Revenue but Lower Distribution Per Unit
- Original Post from The Motley Fool Sg

Last Friday, Cache Logistics Trust (SGX: K2LU) released its 2018 fourth-quarter earnings update. Cache Logistics Trust is a real estate investment trust (REIT) that focuses on logistics properties. It currently has 26 logistics warehouse properties in its portfolio that are located in Singapore, Australia, and China.


Here are 10 things investors should know about Cache Logistics Trust’s latest results:



  1. Gross revenue for the reporting quarter grew 4.8% to S$31.0 million, while net property income fell by 0.6% to S$23.4 million.

  2. The REIT’s distribution per unit (DPU) was down by 5.9% year over year to 1.502 cents, mainly due to lower income for distribution and ahigher number of units in issue.

  3. Based on Cache Logistics Trust’s full-year DPU of 5.903 Singapore cents and its unit price of S$0.74 (as of writing), the REIT has a trailing distribution yield of 8.0%.

  4. As of 31 December 2018, the REIT’s gearing stood at 36.2%, which is a good distance from the regulatory ceiling of 45%.

  5. The REIT’s portfolio had a committed occupancy rate of 95% at the end of the quarter.

  6. The weighted average lease expiry (by gross rental income) was at 3.1 years as of 31 December 2018. Overall, 76.5% of Cache Logistics Trust’s leases will expire within the next five years, while the rest will expire after 2024.

  7. For this quarter, Singapore accounted for 76% of Cache Logistics Trust’s gross revenue. Australia was in second place with 23%, and China accounted for the remaining 1%.

  8. There are a total of 14 properties on which Cache Logistics Trust has the right of first refusal (ROFR) to acquire. These properties belong to the REIT’s sponsor, CWT Limited, which was acquired by the Hong Kong-listed CWT International Limited (previously HNA Holding Group) in late 2017.

  9. Cache Logistics Trust divested Jinshan Chemical Warehouse in Shanghai for RMB87.0 million.

  10. Cache Logistics Trust provided the following outlook guidance:


“The global economy remains uncertain as rising trade tensions and geopolitics continue to weigh in. Singapore’s economy grew slower at 2.2% on a year-on-year basis in 4Q2018 due to a softening manufacturing sector. JTC’s rental indices showed a continuing rental decline for single-user factory and warehouse space, although the rate of decrease has moderated. Industrial factory and warehouse rents are forecasted to change -0.5% to +0.5% in 2019. In Australia, the economy is performing well, although GDP growth is forecasted to average around 3.5% in 2018 and 2019 before slowing in 2020 due to a forecasted slower growth in resource exports.


Looking ahead, the Manager will continue to pursue opportunities for strategic acquisitions and asset enhancements to strengthen its portfolio and grow earnings over time.”


Maximise dividends on your REITs with our brand-new Complete Guide To Buying The Best Singapore REITs. We reveal everything we think you need to know about finding the best REITs that hands you a fat dividend cheque ...even if you have no REITs experience at all! Get instant access to your 100% FREE, actionable, 42-page PDF guide here.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned.



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