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These 3 REITs Have Beaten the Market Over the Last 12 Months

Photo credit: Rafael Matsunaga. Licence: http://creativecommons.org/licenses/by/2.0/

Real estate investment trusts in Singapore’s stock market are not given much love by investors at the moment, judging by how many of them are actually near a 52-week low. According to data from SGX Stock Facts, there are 19 REITs currently trading at a price that is less than 9% higher than a 52-week low.

Some examples of REITs in that group of 19 include CapitaLand Mall Trust (SGX: C38U), AIMS AMP Capital Industrial REIT (SGX: O5RU), and Frasers Hospitality Trust (SGX: ACV).

But, not every REIT is unloved. In fact, there are some that have managed to log double-digit price gains over the last 12 months, handily outperforming the 3% return delivered by the Straits Times Index (SGX: ^STI). Three such REITs, chosen randomly, are Fortune Real Estate Investment Trust (SGX: F25U), Keppel DC REIT (SGX: AJBU), and Keppel REIT (SGX: K71U).

fortune-reit-keppel-dc-reit-keppel-reit-pb-and-dividend-yield-table
Source: S&P Global Market Intelligence

Fortune REIT’s portfolio consists of retail malls located in Hong Kong. The REIT, which is listed in both Hong Kong and Singapore, owns 17 private housing estate retail malls that collectively have 3.18 million square feet of retail space. Some examples of its malls include Fortune City One, Waldorf Avenue, and Provident Square.

In Fortune REIT’s latest earnings release (for the six months ended 30 June 2016), it reported mid-single digit year-on-year growth. Revenue had stepped up by 6.1% to HK$979.1 million, net property income had climbed 7.9% to HK$705.9 million, income available for distribution was 6.7% higher at HK$470 million, and the distribution per unit had increased by 6.0% to HK$0.2478.

Although the REIT managed to grow, it did warn in the earnings release that Hong Kong’s economy had “slowed further in the first quarter of 2016, growing by 0.8% over a year earlier.”

The REIT also added that private consumption in Hong Kong had “slowed visibly from the preceding quarter, growing only mildly by 1.1% year-on-year in the first quarter of 2016.” Furthermore, “the value of total retail sales in Hong Kong registered a decrease of 10.8% year-on-year.”

But, Fortune REIT also highlighted the fact that its malls are focused on “non-discretionary local consumption.” That has played a role in enabling the REIT to “achieve sound financial performance and deliver steady returns through different economic cycles.”

Keppel DC REIT is the first listed REIT in Asia that focuses on data centre assets. The REIT owns 12 data centres that are located across eight countries, namely, Australia, Germany, Ireland, Italy, Malaysia, Singapore, The Netherlands, and the United Kingdom.

The REIT’s future prospects is tied to the growth of the digital economy, as data centres are required to store the digital data produced.

In the first nine months of 2016, Keppel REIT’s business performance has been mixed. Despite seeing a 5.8% year-on-year decline in gross revenue to S$72.3 million, its distributable income and distribution per unit had respectively stepped up by 5.3% to S$46.3 million and 5.2% to 5.24 cents.

In its earnings release, Keppel DC REIT commented that “despite the lacklustre macroeconomic outlook, the data centre industry fundamentals remain positive.” The REIT did warn that an “increase in data centre space in Singapore is expected to exert near-term pressure on rental rates,”  but that management is “confident of the data centre market’s long-term potential.”

Singapore currently accounts for 44.1% of Keppel DC REIT’s total asset value and is the single largest geographical market for the REIT.

Lastly, we have Keppel REIT, which focuses on commercial properties. Its portfolio currently consists of eight office assets located in Singapore (four) and Australia (four).

The first nine months of 2016 have not been a good time for the REIT. In that period, Keppel REIT has seen its gross rent fall by 4.6% year-on-year to S$116.4 million. This pressured the bottom-line, as the REIT’s income available for distribution slipped by 2.3% to S$159.4 million. The distribution per unit followed suit, falling 4.5% to 4.89 cents.

Majority of Keppel REIT’s asset value resides in its Singapore properties. In its latest earnings release, Keppel REIT commented that “new office supply over the next one to two years, coupled with slower economic growth, will… continue to pose challenges for the Singapore office market.”

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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 CapitaLand Mall Trust. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.