Fortune REIT (SGX: F25U) is a Hong Kong-based retail REIT that is dual listed in Singapore and Hong Kong. It owns a portfolio of 17 shopping malls located in Hong Kong. These include prominent malls such as Fortune City One, Fortune Kingswood and Ma On Shan Plaza.
In an earlier article, I took a look at the resilience of the REIT’s portfolio. In this article, I will assess how much the REIT has grown in the past six years by looking at the growth of three key performance indicators: 1) book value per unit; 2) net property income per unit; and 3) distribution per unit.
Book value per unit
A good indicator of the ability of a REIT’s management to increase unitholder value is through its ability to grow the book value per unit.
Often, REITs will increase their overall portfolio through equity financing, which dilutes unitholders interest. On the other hand, REITs that can grow their portfolio without additional equity financing will add more value to unitholders.
Fortune REIT has done impressively well in this regard, growing its book value per unit from HK$8.81 in 2012 to HK$14.05 in 2017. This translates to a compounded annual growth rate (CAGR) of 9.78%.
Net property income per unit
The net property income (NPI) per unit give investors an idea of how much the REIT has grown its profits, after taking into account any unit dilution.
Fortune REIT has been able to grow its NPI per unit from HK46 cents per unit in 2012 to HK76 cents per unit in 2017. This gives a CAGR of 10.48%.
Distribution per unit
Distributions are, perhaps, the biggest draw for REIT investors.
As with the book value per unit and NPI per unit, Fortune REIT has been able to grow its distribution per unit (DPU) consistently over the last six years. DPU has grown from HK$0.2932 in 2012 to HK$0.5078 in 2017. This translates to a CAGR of 11.61%.
The Foolish bottom line
Fortune REIT has undoubtedly performed well over the past six years as it delivered double-digit growth in both DPU and NPI per unit. Its book value per unit has likewise compounded at close to 10% per annum. The management’s prudence in allocating capital and its ability to finance its investments has certainly delivered strong returns to unitholders. With a strong property lineup and the management’s track record of growing the REIT, the future certainly looks bright for Fortune REIT and its unitholders.
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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 Jeremy Chia doesn’t own shares in any companies mentioned.