When it comes to choosing an investment in the stock market, one important aspect to study would be the balance sheet of the company, real estate investment trust, or business trust in question.
A weak balance sheet – one that has high amounts of debt – increases the risk that we as investors have to face. This is especially important now given the strong possibility of rising interest rates.
The Federal Reserve, the US’s central bank, raised interest rates in December 2015, the first time it had done so in nearly a decade. Earlier in June this year, Fed chair Janet Yellen said that there will be more interest rate hikes coming, though the timing is uncertain.
I’ve recently scanned the universe of Singapore-listed REITs and business trusts to find those with a gearing of less than 30%. For perspective, the Monetary Authority of Singapore has set a gearing limit of 45% for REITs here.
Here are three REITs and business trusts I found that meet my gearing criteria: Religare Health Trust (SGX: RF1U), SPH REIT (SGX: SK6U), and Ascendas India Trust (SGX: CY6U). There’s more to their fundamentals that you can see in the table below:
Source: S&P Global Market Intelligence; Trusts’ earnings presentations
Religare Health Trust is a business trust that runs healthcare assets (mainly hospitals and clinical establishments) in India. The trust, which is sponsored by Fortis Healthcare, one of the largest healthcare chains in India, has 18 properties that are located across India.
SPH REIT meanwhile, is a real estate investment trust that is plugged into the retail scene of Singapore with its portfolio of two shopping malls, Paragon and The Clementi Mall. It’s worth noting that the REIT is currently priced at just below its book value.
Lastly, we have Ascendas India Trust, a property trust that runs six IT business parks in India. Its portfolio occupies a total floor area of 9.0 million square feet.
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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 Ong Kai Kiat does not own shares in any companies mentioned.