The Motley Fool

The 3 Cheapest Real Estate Investment Trusts in Singapore

Benjamin Graham, author of the “The Intelligent Investor” and mentor to legendary investor Warren Buffett, was a keen believer of investing in securities with a low price-to-book ratio. The price-to-book ratio or PB ratio is a comparison between how much you are paying for the security and its net asset value.

In theory, buying stocks that trade at a discount to its book value is like buying a $1 coin for less than a dollar. Investors would be able to reap a return when the market realises the discrepancies and raises its share price to its fair value. This method of valuation is especially useful for real estate investment trusts (REITs) or companies with largely tangible assets on its books.

With that, here are three REITs listed in Singapore that at current prices have the lowest price-to-book ratios.

Dasin Retail Trust (SGX:CEDU), which invests primarily in real estate in China used for retail activities. It currently has a portfolio of four retail malls located in Zhongshan City in Guangdong. Dasin Retail Trust is a fairly new trust, which was listed only last year. As of 31 March 2018, the trust had a low gearing ratio of 30.4% and a 100% occupancy rate for its portfolio of assets. At its last transacted price of S$0.865 per unit, Dasin Retail Trust had a price-to-book ratio of just 0.568. It also has an attractive distribution yield of 8.23%.

Fortune Real Estate Investment Trust (SGX:F25U) comes in second. It is primarily listed in Hong Kong but also has a secondary listing in Singapore. It was the first cross border REIT listed in Singapore. The trust has a portfolio of 16 properties in Hong Kong. It has a stellar track record of growing its distribution per unit (DPU) each year, with DPU more than doubling between 2010 and 2017. The REIT also boasts one of the lowest gearing ratios among REITs listed in Singapore of just 27.4%, giving it a HK$12.7 billion of debt headroom to fund acquisitions. At the time of writing, units of Fortune REIT exchanged hands at HK$9.25. This translates to a price-to-book ratio of 0.653 and a trailing distribution yield of 5.53%.

Starhill Global Real Estate Investment Trust (SGX:P40U). This REIT invests in retail and office properties in Singapore and overseas. Since its listing in 2005, the trust has grown from its initial portfolio of just two properties to 11 properties worth around S$3.1 billion. Singaporeans would probably be familiar with two of its landmark properties in Orchard Road, namely Wisma Atria and Ngee Ann City. Since 2006, Starhill Global REIT has managed to grow its DPU at a compounded growth rate of 5.4%. As of 31 March 2018, the trust had a reasonable gearing ratio of 35.3%, which is well below the 45% regulatory cap. At the time of writing, units of Starhill Global REIT were trading at S$0.685. This represents a price-to-book ratio of 0.765 and a distribution yield of 6.58%.

Meanwhile, are you worried about the overall state of the market? Do you know the 1 thing you should never do in the stock market? The Motley Fool Singapore's new e-book lays out a plan to handle market crashes, details the greatest advantage you have as an investor, and looks at decades worth of market data to bring you the smartest insights on investing. You can download the full e-book FREE of charge--Simply click here now to claim your copy.

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.