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2 Cheap Singapore REITs Offering Exposure to China

Property prices in China are increasing rapidly. In May this year, the average new home price in China’s 70 major cities rose 0.7%. The price increase in May also marked the 49th consecutive month of price gains in the country.

On an annual basis, home prices rose a staggering 10.7% in May. The rising middle-income population has propelled the property market in China and kept property price resilient despite government controls and uncertainty surrounding future economic growth. Investors in Singapore, meanwhile, can gain exposure to the fast-growing China property market through REITs listed in Singapore. With that said, here are two cheap China-focused REITs investors can consider.

Riding the e-commerce wave

EC World Real Estate Investment Trust (SGX:BWCU) invests mainly in e-commerce and specialised logistics real estate. It currently owns seven properties, with an eighth property likely to be acquired in the near future. There are a few things to like about its portfolio.

First, the REIT has built-in annual rental escalations that should continue to provide it with visible rental income growth. The new acquisition is also expected to be yield-accretive, and investors can expect a higher distribution per unit when it is added to the portfolio.

Moreover, EC World’s port logistics assets are also inland ports that cater to tenants that handle domestic business with limited exposure to international trade. As such, the ongoing trade war will likely have minimal impact on its tenants’ businesses and their ability to pay rent. At the time of writing, EC World REIT trades at S$0.77 per unit, which gives it a price-to-book ratio of 0.88 and a distribution yield of 7.8%.

Retail therapy

Sasseur Real Estate Investment Trust (SGX: CRPU) is a specialised outlet mall REIT in China. The trust, which owns four malls, had a great debut year on the Singapore stock market. Its distribution per unit came in 9.3% higher than it had forecast in its initial public offering (IPO) prospectus.

Both VIP members and tenant sales also increased at double-digit rates. This is extremely important for the REIT as part of its rental income is linked directly to tenant sales. Outlet malls also hold up well in times of economic crisis, a time when more shoppers turn to cheaper products. This is especially comforting in our current economic climate, where geopolitical uncertainties have caused the world bank to slash economic growth forecasts.

In addition, Sasseur REIT has a gearing ratio of just 29.2%, well below the 45% regulatory limit, which gives it the ability to take on more debt to fund acquisitions in the future. Currently, units of Sasseur REIT trade at S$0.79, giving it a price-to-book ratio of 0.89 and an annualised yield of 8.4%.

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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 units of EC World Real Estate Investment Trust and Sasseur Real Estate Investment Trust.