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2 Things That Investors Should About BHG Retail REIT Now

BHG Retail REIT (SGX: BMGU) is one of the Singapore stock market’s newest real estate investment trusts considering that it listed only in December 2015.

It focuses on retail malls in China and currently has a portfolio with five properties. Its sponsor is the China-listed Beijing Hualian Department Store Co. Ltd, which is part of the Beijing Hualian Group, one of China’s largest retail operators.

REITs that invest predominantly in Chinese retail malls are rare in Singapore’s stock market. The only other REIT here that does so is CapitaLand Retail China Trust (SGX: AU8U).

In this article, we will like to look at two things about the REIT now, namely latest financial performance and valuation.

Latest financial result

Source: BHG Retail REIT FY17 Quarter 2 Result Release

The latest quarterly performance was nicely summarised up by the CEO, Chan Iz-Lynn as follows:

“We are pleased to report strong fundamental performance in the first half of the year. In Renminbi terms, gross revenue and NPI rose 3.4% and 7.8% respectively in 1H 2017. BHG Retail REIT’s underlying portfolio continued to demonstrate resilience, achieving very encouraging rental uplift and robust occupancies.

Looking ahead, we will continue to identify opportunities to value-add and enhance our malls organically, at the same time pursue opportunities that are DPU-yield accretive, and strive to deliver sustainable returns to our unitholders.”

Valuation

Valuation is an important metric to help investors decide on the price to pay for an investment. Ideally, we want to pay a cheap price for our investment.

Here, two simple metrics can be used to evaluate the valuation of a REIT, namely price to book ratio and distribution yield.

What we will do here is to compare BHG Retail REIT’s ratios to that of the average ratios of 39 REITs listed on Singapore Exchange.

Source: SGX.com stockfact

From the above, what we can see is that BHG Retail REIT is trading at a discount to the market average in terms of distribution yield whilst its price to book ratio is trading at 24% premium to the market average.

Conclusion

Overall, BHG Retail REIT delivered a positive performance in the second quarter of 2017. In terms of valuation, it is trading at a discount to the market average indicated by low price to book ratio and high distribution yield.

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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.