A Retail REITs Check-up: 4 Metrics Investors Should See

The earnings season in Singapore is winding down.

The majority of real estate investment trusts (REIT) that are focused on the retail sector have submitted their latest quarterly earnings reports. Retail REITs, as defined by the global industry classification standard (GICS), include:

It might be useful to have a recap in a single place to see how the group fared.

A recent report by bourse operator Singapore Exchange Limited (SGX: S68) comes in handy here.

The report showed a potpourri of ratios and metrics for the REITs based on their latest financials. I have selected four metrics which may be of interest to the Foolish investor: the price-to-book (PB) ratio, the aggregate leverage ratio, the interest cover ratio, and the distribution yield.

Here is a quick summary of the quartet of metrics for the aforementioned REITs (information as of 5 August 2016, unless otherwise stated):

2016-08-22 Retail REIT Table
Source: Singapore Exchange report

Let’s have a few words about the metrics.

The first metric, namely the price to book ratio, can be seen as proxy for the value of a REIT. In general, the lower the ratio is, the better it could be.

Next up, we have the aggregate leverage ratio. The metric measures a REIT’s debt as a percentage of its assets. Generally speaking, a lower aggregate leverage ratio would mean that a REIT would have the debt headroom to take on more borrowings in the future.

Meanwhile, the interest cover ratio measures the number of times a company can pay its interest payments from its earnings. So, a higher figure would be better.

Finally, there is the distribution yield. By itself, a higher distribution yield would mean that investors will receive a higher payout from a REIT. But, as investors, we should look beyond the distribution figure to consider whether a REIT is able to sustain or grow its distribution over the long term.

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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 Chin Hui Leong owns units in Frasers Centrepoint Trust.