The retail scene in Singapore has been affected by changing consumer behaviour and new malls giving stiffer competition.
While some retail real estate investment trusts (REITs) in Singapore have faltered with lower shopper traffic, two REITs have done particularly well. Thriving even when the broader market is faltering could suggest that their portfolios are more resilient.
With that, lets take a look at these two local retail REITs that performed well so far this year.
Mapletree Commercial Trust (SGX: N2IU) owns five properties in Singapore, including Singapore’s largest shopping mall, VivoCity. In the most recent quarter ended 30 June 2018, the trust’s revenue and net property income increased by 0.7% and 2.1% respectively. Its distribution per unit (DPU) held steady at 2.23 cents.
The numbers are more impressive when you consider that its main revenue contributor, VivoCity, has been undergoing renovation works with a new public library and concept stores under construction.
It also achieved a positive rental reversion rate of 1.2% for its overall portfolio, with its retail segment having a 2.1% rental reversion rate in fixed rents. Shopper traffic was also up 0.2% in VivoCity despite the upgrading works.
At the time of writing, units of Mapletree Commercial Trust trade at S$1.64 per unit. The price translates to a price-to-book (PB) ratio of 1.09 and a distribution yield of 5.6%.
Frasers Centrepoint Trust (SGX: J69U) owns a portfolio of six suburban malls in Singapore and has a 31.15% stake in Hektar REIT, a retail-focused REIT in Malaysia.
In the last quarter ended 30 June 2018, Frasers Centrepoint Trust’s revenue and net property income grew 10.9% and 13.7% respectively. Its DPU rose 1.8%. The growth was led by improved performance in Northpoint City North Wing after the completion of an asset enhancement initiative.
There was positive rental reversion at all six of its shopping malls during the quarter with an average of 5% across the portfolio. There was also higher shopper traffic at three of its larger malls — Northpoint City, Causeway Point and Changi City Point.
In addition, Frasers Centrepoint Trust has one of the lowest gearing ratios among REITs in Singapore at just 29.3%, which gives it the financial flexibility to make more debt-funded acquisitions in the future. It also has a healthy interest cover ratio of 6.33 times. The interest cover measures how easily a REIT can pay off its interest expense.
At the time of writing, units of Frasers Centrepoint Trust trade at S$2.24, giving a PB ratio of 1.11 and a distribution yield of 5.4%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of Mapletree Commercial Trust and Frasers Centrepoint Trust. Motley Fool Singapore contributor Jeremy Chia doesn't owns shares in any companies mentioned.