Ascendas Real Estate Investment Trust (SGX: A17U), or Ascendas REIT, owns properties that are used for either commercial or industrial purposes, or both. It has properties in Singapore, Australia, and the UK.
Institutional investors have been buying Ascendas REIT’s shares lately, with a net purchase of about S$23 million (according to sgx.com). This raises a question: Is Ascendas REIT cheap now? This question is important because if the REIT’s shares are cheap, it might be a good opportunity for do-it-yourself investors to consider the REIT as an investment.
Unfortunately, there is no easy answer. However, we can still get some insight by comparing Ascendas REIT’s current valuations with the market’s valuation. The two valuation metrics I will focus on are the price-to-book (PB) ratio and distribution yield.
I will be using the average PB ratio and distribution yield for the 42 REITs that are listed on Singapore’s stock market. With that, let’s look at the comparison below:
Source: Yahoo Finance, OCBC Weekly S-REITs Tracker
From the above, we can see that Ascendas REIT’s distribution yield is lower than that of the market average, indicating that it’s trading at a higher valuation. Similarly, its PB ratio is higher than that of the market average.
In sum, we can argue that Ascendas REIT is trading slightly on the higher end of the valuation spectrum given its low distribution yield and high PB ratio when compared to the market average. Still, investors might want to learn more about the fundamentals of the REIT. After all, such a valuation premium might be reasonable if it has significantly better prospects than its peers.
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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 shares of Ascendas REIT.