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Could Abenomics Boost Value At Saizen REIT?

The Singapore Stock Exchange is home to a handful of companies with business in Japan. In fact, eight have a market capitalisation of more than S$100m and report more than one fifth of their revenues from The Land of the Rising Sun.

Japan suffered two decades of suspended animation, which prompted Prime Minister Shinzo Abe to find new ways to stimulate the economy. His scheme has been dubbed “Abenomics”. It is based around three separate growth strategies: fiscal stimulus, monetary reform and structural reforms.

Recently, the Bank of Japan announced that it would pump more money into the economy to boost domestic activity. Interestingly, this coincided with the US Federal reserve ending its own asset buying program. So as one country shut down its printing press another has fire one up.

If Abenomics is successful, it is possible that companies exposed to Japan, could benefit. However, macroeconomic events should not sway value investors. Instead, value investors should focus on the fundamentals of the business.

Of the eight Japan-connected companies, six pay dividends. Of those eight, the payouts on offer come from Mapletree Logistics Trust (SGX: M44U) and Saizen Real Estate Investment Trust (SGX: DZ8U), with dividend yields of 6.5% and 6.9% respectively.

Both companies are priced close to their book values, with Mapletree trading at a 10% premium. Saizen trades at a 20% discount, which could make it more attractive from a margin of safety perspective.

However, both companies trade at high earnings multiples of over 20. This is quite some way above the market average of 14.

At present the companies do not tick all the necessary boxes that a value investor would like to see. But they could be worth keeping an eye on.

This is particularly true of Saizen. If the latest round of monetary stimulus has the desired effect on the Japanese economy, namely, increased consumer spending and higher consumer confidence, then commercial REITs could stand to benefit. Saizen could be one to watch.

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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 Adam Kuo doesn’t own shares in any companies mentioned.