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Institutional Investors Have Been Buying These 2 Billion-Dollar Singapore REITs

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 purchase in dollar value by institutional investors for the week ended 3 May 2019. They are CapitaLand Mall Trust (SGX: C38U) and Mapletree Logistics Trust (SGX: M44U).

Source: Singapore Exchange; SGX Stock Facts

The first REIT that saw its shares bought 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.

CMT began the year 2019 with a solid performance. For the quarter ended 31 March 2019, it reported that gross revenue was up 10.0% year-on-year to S$192.7 million. Similarly, net property income grew 11.5% year-on-year to S$140.1 million. The year-on-year improvement in gross revenue and NPI (net property income) was due to an acquisition, as well as higher rental income from certain properties. Consequently, distribution per unit (DPU) grew 3.6% year-on-year to 2.88 cents.

Mr Tony Tan, CEO of the REIT’s manager, commented on the REIT’s outlook:

“Amidst slowing down of the global and Singapore economies, we remain cautious in our outlook. The coming on stream of new retail space of about 1 million square feet (excluding Funan) in Singapore this year is expected to intensify competition among shopping malls. We will stay proactive in our asset and investment management, and continually evaluate opportunities to grow and enhance CMT’s portfolio. These include potential enhancement initiatives for CMT’s older assets, as well as acquisition and redevelopment opportunities.”

As at 31 March 2019, the retail REIT clocked in a gearing ratio of 34.4% while its occupancy rate stood at 98.8%.

The next REIT that saw its shares bought by institutions recently is Mapletree Logistics Trust or MLT. As a quick introduction, MLT is a REIT that owns 141 logistics properties around the Asia-Pacific region including in Singapore, Hong Kong, Japan, China, South Korea, Australia, and others.

Similar to CMT, MLT delivered a solid earnings update recently. In the quarter ended 31 March 2019, MLT reported that gross revenue grew 13.0% to S$121.4 million while net property income jumped 15.0% to S$105.0 million. Also, DPU was up by 4.5% year-on-year to 2.024 cents, mainly due to the higher net property income. The 5.0% year-on-year growth in DPU was achieved despite an increase in shares from 3.1 billion last year to 3.6 billion this year. The stronger performance was mainly driven by growth from the existing portfolio as well as contributions from new acquisitions.

Ms Ng Kiat, Chief Executive Officer of MLT’s manager, commented: 

“We cap off a busy year with continued growth in 4Q to deliver a higher full year DPU of 7.941 cents. Post year-end, we divested five older properties in Japan with limited growth potential as part of our portfolio rejuvenation strategy. We will continue to work on improving the quality of the portfolio and drive leasing and asset management to deliver sustainable returns.”

As of 31 March 2019, the REIT’s gearing stood at 36.2% while its occupancy rate stood at 98.0%.

Conclusion

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. The Motley Fool Singapore has recommended the shares of Mapletree Logistics Trust and CapitaLand Mall Trust.