There are many ways to find investment ideas. Some useful ways are to screen for stocks or to look at a list of stocks near their 52-week lows to sieve out potential bargains. Studying what institutional investors have been buying or selling is another avenue. Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and so on. These investors tend to possess vastly greater resources than individual investors like you and me when researching stocks. Hence, it may be useful to keep a close eye on what they…
There are many ways to find investment ideas. Some useful ways are to screen for stocks or to look at a list of stocks near their 52-week lows to sieve out potential bargains. Studying what institutional investors have been buying or selling is another avenue.
Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and so on. These investors tend to possess vastly greater resources than individual investors like you and me when researching stocks. Hence, it may be useful to keep a close eye on what they are doing, as a way to generate ideas.
In this article, I will look at two Singapore REITs that have seen the highest net disposal in dollar value by institutional investors for the week ended 8 March 2019. They are: CapitaLand Mall Trust (SGX: C38U) and First Real Estate Investment Trust (SGX: AW9U).
Source: Singapore Exchange; SGX Stock Facts
The first REIT that saw its shares sold off by institutional investors is Capitaland Mall Trust or CMT. As a quick introduction, CMT currently has 15 properties which are located in the suburban areas and downtown core of Singapore. Example of properties includes Tampines Mall, Junction 8, Funan, IMM Building, Plaza Singapura, Bugis Junction and others.
Despite recent net sales by institutional investors, CMT actually did well in its last financial year. For the year ended 31 December 2018, CMT reported that gross revenue was up 2.2% year-on-year to S$697.5 million. Similarly, net property income grew 3.2% year-on-year to S$125.7 million. The year-on-year improvement in gross revenue and NPI (net property income) was due to acquisition, as well as higher rental income from certain properties. Consequently, distribution per unit grew 3.0% year-on-year to 11.5 cents.
Mr Tony Tan, CEO of the REIT’s manager, commented:
“In 2018, we rejuvenated CMT’s portfolio by divesting Sembawang Shopping Centre and redeploying the proceeds into acquiring the remaining interest in Westgate – a higher-yielding quality asset. The equity fund raising exercise to partially finance the acquisition was more than 2.7 times covered, demonstrating investors’ continued confidence in CMT.”
As at 31 December 2018, the retail REIT clocked in a gearing ratio of 34.2% while its occupancy rate stood at 99.2%.
The next REIT that saw its shares sold off by institutions recently is First REIT.
As a quick introduction, First REIT is a healthcare-focused real estate investment trust. It currently has a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsor is Indonesia’s largest listed property company, PT Lippo Karawaci Tbk.
For the quarter ended 31 December 2018, First REIT’s gross revenue increased 2.7% while its net property income (NPI) improved 1.9%, respectively, as compared to the same period last year. The improvement was primarily due to contributions from the newly-acquired Siloam Hospitals Buton & Lippo Plaza Buton and Siloam Hospitals Yogyakarta, as well as increased rental income from existing properties. Distribution per unit (DPU) came in flat at 2.15 cents.
As of 31 December 2018, First REIT’s gearing and committed occupancy rate stood at 35.0% and 100%, respectively.
Mr Victor Tan, asset manager of First REIT, made the following comment:
“We are pleased to close the year with stable and credible results underpinned by steady performance from our existing portfolio of 20 properties in Indonesia, Singapore and South Korea. With OUE and OUELH on board, First REIT and Bowsprit are well-positioned to tap on the growing opportunities in the Asia Pacific region to capitalise on the tremendous growth in demand for quality and affordable healthcare. In addition to the right-of-first-refusal to Lippo Karawaci’s pipeline of properties for acquisition in Indonesia, we now also have a first-right-of-refusal from OUELH. Our roadmap for the next three to five years is to look at asset rebalancing, diversifying our income streams by expanding into other geographical regions, as well as exploring opportunities to unlock the value of our existing assets.”
Looking at what institutional investors are doing could be a useful tool in your toolkit when sourcing for investment ideas. But do note that the information presented here is by no means a recommendation to take any action on the stocks mentioned. Instead, it should be viewed only as a useful starting point for further research.
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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. Motley Fool Singapore has recommendations for CapitaLand Mall Trust and First Real Estate Investment Trust.