Singapore’s Global Real Estate Companies with the Best Returns

The Singapore stock market hosts 12 listed real estate companies which make up the FTSE All-World Index.

The FTSE All-World Index consists of more than 3,000 stocks that represent around two-thirds of the total market capitalisation of all primary-listed stocks around the world. In this sense, it can be considered a global stock market benchmark.

Finding the best returns

The return on equity (ROE) is a measure of how well a business generates profits for every shareholder dollar it has. It can be a quick way to compare the business quality of different companies.

A recent report shared information on the aforementioned 12 companies and their associated ROEs. From there, we can fish out the best of the lot (figures as of 30 May 2016, unless otherwise stated):

  1. Within the list of 12, five are real estate investment trusts (REITs). For the non-REIT companies, the average ROE is 6.9%. Yanlord Land Group Limited  (SGX: Z25) has the highest ROE of the group at 8.6%. The real estate developer and manager trades at a price to book (P/B) ratio of 0.6 and offers a 1.2% dividend yield.
  2. It might be interesting to note that five of the seven non-REIT companies are also components of the Straits Times Index (SGX: ^STI). This includes Hongkong Land Holdings Limited (SGX: H78)CapitaLand Limited (SGX: C31), and Global Logistics Properties Ltd (SGX: MC0). All three offer a dividend yield that is above 3%. Hongkong Land trades at a P/B ratio of 0.5, has a ROE of 7.2%, and has a market capitalisation of $19.8 billion; it is the largest of the lot.
  3. UOL Group Limited (SGX: U14) is part of the list of seven non-REIT real estate companies too. The real estate developer and manager, which is also a constituent of the Straits Times Index, sports a dividend yield of 2.6% and a P/B ratio of 0.6 times. Its ROE is just 5%.
  4. There are familiar names in the REIT segment. CapitaLand Mall Trust (SGX: C38U), which houses some of Singapore’s most popular shopping malls, weighs in with a dividend yield of 5.3% and a P/B ratio of 1.1. This is closely followed by Ascendas Real Estate Investment Trust (SGX: A17U) from the industrial REIT space. The latter has a distribution yield of 6.5% and a similar P/B ratio of 1.1.

The ROE provides one dimension for investors to gauge the profit generating potential of a company. Investors should note that the ratio is also a historical measure, therefore we have to determine if a company will continue generating a ROE in the future that is commensurate with history. The real estate sector can also be cyclical, which may cause the ROE of a real estate company to rise and fall in tandem.

In the meantime, if you'd like to keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Hongkong Land Holdings.