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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 to explore.

Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and the like. 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’ll look at two Singapore REITs that have seen the highest net purchases in dollar value by institutional investors for the week ended 16 August 2019. They are CapitaLand Commercial Trust (SGX: C61U) and CapitaLand Mall Trust (SGX: C38U).

Source: Singapore Exchange; SGX Stock Facts

CapitaLand Commercial Trust

The first REIT that saw its shares bought by institutional investors is Capitaland Commercial Trust, or CCT. As a quick introduction, CCT is one of the largest commercial real estate investment trusts (REITs) in Singapore by market capitalisation. The REIT has ownership over nine commercial properties in Singapore and one property in Germany.

There are many good reasons for institutional investors to buy CCT’s stock. To start with, CCT recently delivered strong results. For the quarter ended 30 June 2019, CCT’s gross revenue grew 3.0% year-on-year to S$101.0 million. Similarly, distribution per unit (DPU) came in stronger by 1.9% year-on-year to 2.20 cents.

Moreover, my colleague Jeremy Chia (in his article here) explained why the CCT’s recent acquisition in Germany is great news for unitholders. Some of the reasons include the freehold structure, a prime location and the DPU-accretive nature of the deal.

One downside, however, is that the REIT is not trading at bargain level right now, with a distribution yield of a relatively low 4.2%. Comparatively, the average yield for the 42 REITs in Singapore is about 6.3%.

CapitaLand Mall Trust

The next REIT that saw its shares bought by institutions recently is CapitaLand Mall Trust, or CMT. As a quick introduction, CMT currently has 15 retail properties which are located in the suburban areas and downtown core of Singapore. Examples of these properties includes Tampines Mall, Junction 8, Funan, IMM Building, Plaza Singapura, Bugis Junction, and others.

Similar to CCT, CMT delivered a solid performance lately. Here are some numbers for the quarter ended 30 June 2019. Gross revenue jumped 10.6% year-on-year to S$189.5 million while net property income grew by 10.2% to S$133.2 million. Consequently, the REIT’s DPU climbed 3.9% to 2.92 Singapore cents, up from 2.81 cents during the same period last year.

Despite its positive performance lately, CMT is also trading at a rich valuation (with a distribution yield of 4.5%). Thus, investors will need to have solid reasons to invest in the REIT at its current valuation. In his article here, my colleague Jeremy Chia shared a few reasons (one of which is the expected rental boost from Funan) that have contributed towards CMT’s rich valuation.

Foolish takeaway

Looking at what institutional investors are doing could be a useful tool 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.

Want to keep reading on how to lock in those sweet REIT dividends? Our Complete Guide To Buying The Best Singapore REITs dives into what we think you need to know about finding the best REITs that regularly hand you a fat dividend cheque. Click here to download your FREE guide.

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 CapitaLand Commercial Trust and CapitaLand Mall Trust.