The Motley Fool

2 China-Based Singapore REITs You Can Buy This Chinese New Year

Last week, more than a billion Chinese around the world celebrated the beginning of a new lunar new year. Chinese New Year is a time when married Chinese couples give ang baos to relatives and friends. During this festive period, why not give yourself a chance to earn a big ang bao of your own?

With that, here are two REITs with exposure to the Chinese real estate market that are currently offering more than 8% yields right now.

A sassy portfolio

Sasseur Real Estate Investment Trust (SGX: CRPU) owns four outlet shopping malls in China. Just listed in March of 2018, Sasseur REIT is one of the newest REITs in the market, but don’t let that turn you off.

Despite its short history as a listed REIT, Sasseur REIT has demonstrated that its portfolio of outlet malls has a long runway for growth. Total sales at all four of its malls increased at double-digit rates in 2018’s third quarter, with two malls in particular achieving impressive sales growth of 91.1% and 60.3%. As Sasseur REIT’s agreement with its entrusted manager comprises a variable rental agreement that is depended on tenant sales, the REIT can benefit directly from the sales growth in its malls.

Image source: Pixabay.

Outlet malls are also less susceptible to economic downturns compared to traditional malls. This is because outlet malls sell highly discounted branded goods that continue to be in high demand even in slowing economies. This is comforting, especially considering the slowdown in China’s GDP growth in 2018.

At S$0.66 per unit, Sasseur REIT sports an annualised yield of 9.5%, a tasty proposition in my book.

E-Z money?

EC World Real Estate Investment Trust (SGX: BWCU) invests in specialised and e-commerce logistics real estate in China. In the third quarter of 2018, EC World REIT delivered a healthy 9.0% increase in distribution per unit on the back of absence of withholding tax charged in 2017.

Image source: Pixabay

The manager at EC World has negotiated built-in rental escalations with most of its key tenants, ranging from 1% to 10% annual escalations. This will provide consistent and visible organic earnings growth.

Not only does EC World have the propensity for organic growth, but it also boasts the financial muscle to make more yield-accretive acquisitions. The REIT’s gearing of just 30.7% is one of the lowest gearings among Singapore-listed REITs, and it will allow the company to take on more debt if an acquisition opportunity arises.

Right now, EC World also sports an attractive valuation. At S$0.7 per per unit, it trades at a 16% discount to book value and has a distribution yield of 8.3%.

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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 Jeremy Chia owns shares of EC World Real Estate Investment Trust.