One of the more popular types of investments in Singapore is the real estate investment trust. Right now, there are over 30 REITs in the local stock market that invest across a wide variety of real estate sectors. Some of the greatest investors around – good examples are John Neff and Walter Schloss – look at lists of stocks that have fallen hard for potential investing ideas. They believe that some beaten-down stocks may be bargains in relation to their actual economic worth. Nearly once every week, I run a screen to look for companies in Singapore’s market that are…
One of the more popular types of investments in Singapore is the real estate investment trust. Right now, there are over 30 REITs in the local stock market that invest across a wide variety of real estate sectors.
Some of the greatest investors around – good examples are John Neff and Walter Schloss – look at lists of stocks that have fallen hard for potential investing ideas. They believe that some beaten-down stocks may be bargains in relation to their actual economic worth.
Nearly once every week, I run a screen to look for companies in Singapore’s market that are near 52-week lows. In most weeks, REITs will appear on my screen.
So, let’s take a closer look at two REITs I’ve chosen at random from a list of REITs that have unit prices near their respective 52-week lows: Far East Hospitality Trust (SGX: Q5T) and Starhill Global Real Estate Investment Trust (SGX: P40U).
Source: SGX Stock Facts; Yahoo Finance
Far East Hospitality Trust is technically not just a REIT – it is a stapled trust that consists of a REIT and a business trust. But, we’re not going to be splitting hairs here!
The trust currently has 12 properties in its portfolio. These properties, which are all located in Singapore, comprise of eight hotels and four serviced residences and they are strategically located within close proximity to business districts, leisure attractions, MICE facilities and healthcare facilities. Examples of hotels under the trust are The Elizabeth Hotel, Village Hotel Bugis, and Oasia Hotel.
The trust is expected to announce its 2016 full year results on 22 February. The first nine months of 2016 have been a challenging time for Far East Hospitality Trust. It experienced a 4.9% year-on-year decline in gross revenue, which led to a 6.4% fall in the distribution per stapled security.
Moving onto the second REIT on the list, we have Starhill Global REIT, which focuses on commercial as well as retail properties in Asia and Australia. Currently, the REIT has 12 properties across Singapore, Malaysia, China, Japan, and Australia.
The REIT’s largest market is Singapore (accounting for 68% of Starhill Global REIT’s total assets), followed by Australia and Malaysia (both collectively account for 29% of total assets).
Starhill Global REIT recently announced its results for the quarter ended 31 December 2016. In that period, it experienced year-on-year declines of 2.8% and 4.5%, respectively, in its gross revenue and distribution per unit. All of the REIT’s geographies turned in lower revenue, except for Malaysia.
In the earnings release, Starhill Global REIT commented that retail sentiment in Singapore “remains soft with the retail sales index (excluding motor vehicle sales) declining 2.1% y-o-y in November 2016.”
There was slightly better news in Australia as “low interest rates and a stable labour market continue to contribute to retail sentiments” there. In Malaysia, “retail sales remained sluggish in the third quarter of 2016, and the projected retail sales growth for 2016 was revised downwards from 4% to 3.5%.” The retail market in Malaysia also saw the completion of 3.36 million square feet of new retail space in the second half of 2016.
A Foolish summary
Though the REITs mentioned above are trading near their respective 52-week lows, there is no guarantee that their unit prices will not fall further.
What is important is the business performance of the REITs going forward. Some important areas for investors to look at with the REITs before coming to an investment decision include their property profiles, debt profiles, and quality of management.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.