Mapletree Commercial Trust (SGX: N2IU), or MCT, is the owner of Singapore’s largest mall, VivoCity, together with MBC I, PSA Building, Mapletree Anson and MLHF.
Institutional investors have been buying MCT’s shares lately, with a net purchase of about S$13.4 million (according to sgx.com). This raises a question: Is MCT 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 investing now.
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Unfortunately, there is no easy answer. However, we can still get some insight by comparing MCT’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 in Singapore’s stock market. With that, let’s look at the comparison below:
Source: Source: Yahoo Finance, OCBC Weekly S-REITs Tracker
From the above, we can see that MCT’s distribution yield is lower than that of the market average, indicating that it’s trading at a higher valuation. Similarly, its high PB ratio suggests that MCT is trading at a premium valuation.
In sum, we can argue that MCT is trading on the higher end of the valuation spectrum given its low distribution yield and high PB ratio when compared to the market average. In other words, it’s not cheap for investors to buy its shares at this point in time.
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 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 the shares of Mapletree Commercial Trust.