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Institutional Investors Have Been Selling These 2 Billion-Dollar 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, and insurance companies. 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 disposals in dollar value by institutional investors for the week ended 2 August 2019. They are Mapletree Logistics Trust (SGX: M44U) and Suntec Real Estate Investment Trust (SGX: T82U).

Source: Singapore Exchange; SGX Stock Facts

Mapletree Logistics Trust

The first REIT that saw its shares sold off by institutional investors is Mapletree Logistic Trust, or MLT. As a quick introduction, MLT is a real estate investment trust (REIT) that owns 137 logistics properties around Asia.

Despite institutional investors’ recent sell-off, MLT actually began its financial year with a strong set of earnings numbers. For the quarter ended 30 June 2019, it reported that gross revenue was up 13.6% year-on-year to S$119.8 million. Also, distribution per unit (DPU) grew by 3.5% year-on-year to 2.025 cents. You can read more about MLT’s latest results here.

One thing to note here is that the REIT is not trading at bargain level now, with a distribution yield of 5.2%. Comparatively, the average yield for the 41 REITs in Singapore is about 6.1%. Thus, I think investors should be cautious when buying the REIT at its current level.

Suntec REIT

The next REIT that saw its shares sold off by institutions recently is Suntec REIT. As a quick introduction, Suntec REIT is one of the largest REITs in Singapore and currently has interests in retail malls and offices in Singapore and Australia. Its portfolio includes Suntec City, a one-third interest in One Raffles Quay, a commercial building in Sydney and a 50% stake in Southgate Complex in Melbourne, to name just a few.

Unlike MLT, Suntec REIT delivered weaker results lately. Here are some numbers. For the quarter ended 30 June 2019, gross revenue declined 2.3% to S$88.4 million while net property income (NPI) fell by 7.2% to S$56.4 million. Similarly, the REIT’s distribution per unit (DPU) was down by 4.6% to 2.361 cents.

Despite the weak overall performance, there’s a bright spot about Suntec REIT – Suntec City. Mr. Chong Kee Hiong, Chief Executive Officer of the Manager, commented on Suntec City’s performance:

“We are pleased to report that revenue had increased 4.0% driven by positive rental reversion. The key operation indicators remained robust with footfall and tenants’ sales growing 3.9% and 1.7% year-on-year respectively. The mall is expected to continue to perform well, notwithstanding the continuing challenges in the retail sector.”

As of 30 June 2019, the REIT’s gearing stood at 38.3% while its committed occupancy rate stood at 99.1% and 97.9%, respectively, for its office and retail properties at end of the quarter.

Foolish takeaway

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.