Real estate investment trusts (REITs) are popular among income investors due to the predictable nature of their distributions. REITs in Singapore are required to distribute at least 90% of their income to unitholders to enjoy tax benefits.
In Singapore’s stock market, there are a few REITs with attractive distribution yields and growth prospects that may be of interest to investors. Let’s take a look at two such REITs.
The attractive healthcare REIT
The first REIT to be featured is First Real Estate Investment Trust (SGX: AW9U) (pun not intended). It is Singapore’s first healthcare REIT and it currently owns 20 properties — mainly hospitals and nursing homes —in Indonesia, Singapore, and South Korea.
For those who are looking for a portfolio with resilient assets, First REIT could be it. Since the REIT owns hospitals, the tenants’ services are essential for the public, even during an economic downturn.
Of late, First REIT’s unit price has been falling, perhaps because of the weakening of the Indonesian rupiah against the Singapore dollar. Most of First REIT’s properties are in Indonesia, but most of its rental income is based on the Singapore dollar, and the REIT also reports its earnings in the Singapore dollar. However, those who believe in the long-term resiliency of First REIT could have an opportunity to invest in it now at an attractive distribution yield of 7.4% at the REIT’s unit price of S$1.17 at Wednesday’s close.
First REIT’s growth could come from the acquisition assets from its sponsor as well as from OUE Lippo Healthcare Ltd (SGX: 5WA). To know more about the acquisition-related growth opportunities for First REIT, you can head here.
At the unit price of S$1.17, First REIT has a price-to-book (PB) ratio of 1.08.
All about data
Keppel DC REIT (SGX: AJBU) is the next REIT I want to discuss. It is the first pure-play data centre REIT listed in Asia, and currently has a portfolio comprising 15 high-quality data centres that are located in main data centre hubs (Singapore, Malaysia, Australia, UK, the Netherlands, Ireland, Italy, and Germany).
For the third quarter of 2018, Keppel DC REIT’s gross revenue and net property income grew impressively by 34% and 33%, respectively, compared to a year ago. The REIT could go on to grow further in the years ahead. There is sustained demand for data centre space because of the trends of increasing digitalisation, cloud adoption, and data centre outsourcing.
Keppel DC REIT also has a healthy gearing ratio of 32%, well below the 45% regulatory gearing limit imposed on REITs by the Monetary Authority of Singapore. The low gearing allows Keppel DC REIT to take on more debt to grow its data centre footprint further.
At Wednesday’s close, Keppel DC REIT’s unit price was S$1.33, which gives the REIT a PB ratio of 1.3 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 First Real Estate Investment Trust. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.