The Motley Fool

2 Singapore-Listed REITs With Overseas Assets I Am Watching This Week

Earnings season is well and truly upon us. In an earlier article, I highlighted two Singapore-based REITs that Foolish investors should keep an eye on. Besides those, there are two trusts with their assets predominantly overseas that will have my interest when they release their earnings updates this week.

Banking on one of the fastest growing economies in the world

Ascendas India Trust (SGX: CY6U) is one of just two Singapore-listed trusts that invest primarily in real estate in India. India is the fastest growing large economy in the world, exceeding even that of China. Ascendas India Trust, with its portfolio of IT parks and warehouses in key cities in India, is, therefore, expected to ride on the coattails of economic tailwinds.

In the last quarter, on a constant currency basis, the trust reported an 8% and 14% increase in total property income and net property income respectively. That being said, the trust continues to face currency risk. Since its listing, the Indian rupee has plunged approximately 50% against the Singapore dollar. As the trust distributes its earnings to unitholders in Singapore dollars, its DPU has fluctuated wildly because of the weakening Indian rupee.

Source: Ascendas India Trust FY18/19 2Q Earnings Presentation

While I am expecting higher revenues on a constant currency basis this quarter, I will also be keeping a close eye on any foreign exchange losses and what management has to say about the strength of the Indian rupee going forward.

In addition, investors should keep an eye on updates on the progress of Ascendas India Trust’s developments. The trust is currently in the process of developing two of its tech parks to increase the number of buildings and leasing space.

Finally, I will be monitoring the trust’s interest expense. Despite having a low gearing ratio (a measure of debt levels) of 32%, the trust’s interest coverage (how easily a REIT can use its earnings to pay off its interest expenses) was still just 4.1 times, which is low in my books. The high cost of debt at 6.1% is one of the main reasons for the high-interest expense. A further deterioration of the interest coverage ratio might be a concern for investors.

Broadening its reach

Frasers Logistics and Industrial Trust (SGX: BUOU) took a major step to broaden its portfolio diversification in 2018. In May last year, the trust purchased 21 properties in Europe, marking its maiden purchases outside of its core market in Australia.

The acquisition, along with three acquisitions later in the year, brought the trust’s total number of properties up to 82, with a valuation of around A$3.0 billion.

In the last financial year, despite a weakening of the Australian dollar against the local currency, Frasers Logistics and Industrial Trust managed to eek out a 2.6% increase in distribution per unit.

With the full-year contribution from the European acquisition expected to be yield-accretive, I am expecting another solid year of growth ahead. Additionally, the trust has built-in rental escalations averaging 3.1% in its Australian portfolio, which will provide visible higher rental income each year.

However, like Ascendas India Trust, foreign currency fluctuations remain a worry for the REIT. In the upcoming update, I will be looking out for any updates on how the weaker Australian dollar has impacted the REIT.

The reporting quarter will also be the first full quarterly contribution from three properties that the trust acquired in October and September. It will be interesting to see if these properties are yield-accretive to the trust and if management has further plans for growth through acquisitions and capital recycling this year.

Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know--and we've laid them all out in The Motley Fool Singapore's new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. 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 owns units in Frasers Logistics and Industrial Trust.