In a low-interest environment, REITs are particularly attractive due to their relatively predictable earning power.
In this article, we will look at two REITs that have lived up to investors’ expectations by delivering good performances in their latest earnings.
The first REIT that has performed well is Keppel DC REIT (SGX: AJBU).
As a quick introduction, Keppel DC REIT is a real estate investment trust that is involved in data centres. Listed in December 2014, the REIT manages 14 data centres in Asia and Europe.
Gross revenue grew 17.9% year-on-year to S$ 38.0 million, whilst net property income (NPI) improved by 18.2% to S$ 34.1 million. The stronger performance was driven by new acquisitions and higher income from Keppel DC Singapore 1, partially offset by lower income from certain properties. Distribution per unit (DPU) was down by 4.8% as compared to the same period last year. Excluding one-off capital distribution, adjusted DPU was up 3.4% year-on-year to 1.8 cents.
Keppel DC REIT expanded into Germany with the completion of maincubes Data Centre on 30 March 2018. Also, it entered into a contract to acquire the remainder of the 999-year leasehold land interest in Keppel DC Dublin 1.
Based on an annualised DPU of 7.2 Singapore cents and a closing price of S$1.43, as at 20 January 2018, the REIT has a trailing distribution yield of 8.2%.
The next REIT on the list is First Real Estate Investment Trust (SGX: AW9U) or First REIT.
As a quick introduction, First REIT is a healthcare-focussed real estate investment trust. It currently has a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsor is Indonesia’s largest listed property company, PT Lippo Karawaci Tbk.
For the quarter, gross revenue increased 5.8%, whilst net property income (NPI) improved 5.8%, respectively, as compared to the same period last year. The improvement was primarily due to contributions from the newly-acquired Siloam Hospitals Buton & Lippo Plaza Buton, and Siloam Hospitals Yogyakarta, as well as increased rental income from existing properties in Singapore and Indonesia. Similarly, distribution per unit (DPU) came in higher at 2.15 cents, 0.5% higher than the same period last year.
Mr Victor Tan, asset manager of First REIT, said:
“Our long-term strategy of making yield accretive acquisitions has allowed the Trust to grow its returns steadily over the years.
Going forward, we will continue to uphold this strategy, maintain our resilient rental structure and manage our capital resources prudently to further enhance income stability and maximise returns to 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 Lawrence Nga doesn’t own shares in any companies mentioned.