It’s earnings season again. Real estate investment trusts (REITs) have always been one of the favourite investment choices for risk adverse investors due to their stable earnings qualities. In this article, I will look at two REITs that have lived up to their investors’ expectation by delivering positive performances in their latest earnings updates.
The first REIT on the list is Ascott Residence Trust (SGX: A68U). As a quick introduction, Ascott Residence Trust is a REIT focusing on hospitality assets. Its sponsor is property giant, CapitaLand Limited (SGX: C31).
For the third quarter ended 30 September 2018, Ascott reported that revenue grew 6% year-on-year to S$134.5 million while gross profit improved by 9% to S$64.2 million. Similarly, distribution per unit (DPU) was up by 8% as compared to a year ago to 1.82 cents. Revenue improved as a result of acquisitions, as well as stronger contribution from existing properties.
Beh Siew Kim, chief executive of the REIT’s manager, commented:
“Ascott Reit’s key markets achieved strong operating performance in 3Q 2018. Singapore was the best performer with a 27% surge in gross profit for properties under management contracts due to higher market demand and average daily rate. Gross profit in Japan and United States grew 24% and 21% respectively. Japan saw higher corporate demand in Tokyo, while there was stronger demand for the refurbished apartments at Sheraton Tribeca New York Hotel. Excluding Ascott Reit’s divestment of two properties in Shanghai and Xi’an in January 2018, gross profit in China increased 16%, bolstered by an increase in project groups on extended stay. In Australia, gross profit for properties under management contracts went up 7% due to higher leisure demand.”
As of 30 September 2018, the REIT’s gearing stood at 36.4%, which is a safe distance from the regulatory ceiling of 45%.
The next REIT on the list is Mapletree Logistics Trust (SGX: M44U). As a quick introduction, Mapletree Logistics Trust, or MLT, is a REIT that owns 138 logistics assets in Singapore, Hong Kong, Japan, China, South Korea, Australia, Malaysia and Vietnam.
In the latest quarter ended 30 September 2018, MLT reported that gross revenue grew 13.8% year-on-year to S$106.6 million while net property income improved by 14.6% during the period to S$90.2 million. Also, DPU was up by 3.8% year-on-year to 1.958 cents. The growth in DPU was achieved despite an increase in units from 2.5 billion last year to 3.2 billion this year. The stronger performance was mainly driven by growth from the existing portfolio, as well as contributions from two acquisitions in Hong Kong.
Ng Kiat, chief executive of MLT’s manager, said:
“Over the past 12 months, we have gained significant momentum in our portfolio rejuvenation and recycling efforts, thereby increasing the proportion of modern-specs properties in MLT’s portfolio, especially in our core markets with growth potential. We will continue to build on this momentum to future-proof our portfolio.”
As of 30 September 2018, the REIT’s gearing stood at 38.1% while its occupancy rate stood at 97.6%.
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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.