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 investment ideas.
In this article, I will look at two Singapore REITs that have seen the highest net purchase in dollar value by institutional investors for the week ended 8 March 2019. They are: Ascendas Real Estate Investment Trust (SGX: A17U) and Capitaland Retail China Trust (SGX: AU8U).
Source: Singapore Exchange; SGX Stock Facts
The first REIT that saw its shares sold off by institutional investors is Ascendas REIT. As a quick introduction, Ascendas REIT owns properties that are used for either commercial or industrial purposes or both. It has properties in Singapore, Australia and the United Kingdom.
In the latest quarter ended 31 December 2018, Ascendas REIT reported that gross revenue improved as compared to the same period last year (up 4.2% year-on-year) due to new acquisitions in Australia and UK, as well as higher income from a redeveloped Singapore property. Similarly, net property income (NPI) grew 6.6% year-on-year to S$168.0 million. Consequently, distribution per unit (DPU) improved by 0.7% year-on-year to 3.998 cents (offset by an enlarged number of shares in issue). As of 31 December 2018, the REIT’s gearing stood at 36.7% while its committed occupancy rate stood at 91.3%.
Mr William Tay, Chief Executive Officer and Executive Director of the REIT’s Manager commented:
“Our operating performance in Singapore was relatively stable in the third quarter despite a cloudier economic outlook due to the ongoing US-China trade conflict. We have strengthened our portfolio with new acquisitions in the United Kingdom and in Australia, and these new investments have contributed significantly to the overall performance of the Trust. In Singapore, we are excited to develop Grab’s headquarters in one-north business park, which will further enhance our business park portfolio.
The next REIT that saw its shares sold off by institutions recently is Capitaland Retail China Trust or CRCT. As a quick introduction, CRCT is a Singapore-based real estate investment trust (REIT) investing in retail real estate in China. The trust shopping malls are located in China, Hong Kong and Macau.
For the quarter ended 31 December 2018, CRCT reported that revenue grew 3.0% to S$55.7 million while net property income jumped 8.8% to S$35.9 million. The higher net property income was due to the newly acquired Rock Square and the improved performance in CRCT’s core multi-tenanted malls. Similarly, distribution per unit (DPU) grew 2.1% year-on-year to 2.42 cents.
Mr Tan Tze Wooi, CEO of CRCT’s manager, commented:
“CRCT delivered a resilient set of results in FY 2018 on the back of strong operating performance. Portfolio occupancy as at 31 December 2018 was 97.5% and rental reversion was 10.9%. Tenants’ sales at our multi-tenanted malls grew 18.8% year-on-year, while shopper traffic was up 19.4%. Further to the acquisition of Rock Square, CRCT’s investment property value surged 17.8% to RMB13, 993 million as at 31 December 2018. Through active balance sheet management, we have already completed CRCT’s refinancing requirements for 2019 with 80%3 of the total debt on fixed interest rates. As at 31 December 2018, about 80% of CRCT’s distributable income were hedged into Singapore dollars to mitigate the impact of foreign currency fluctuations.”
As of 31 December 2018, the REIT’s gearing stood at 35.4% while its committed occupancy rate stood at 97.5%.
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 Ascendas REIT and CapitaLand Retail China Trust.