Analysing REITS

Thread Rating:
  • 4 Vote(s) - 3.75 Average
  • 1
  • 2
  • 3
  • 4
  • 5
The Straits Times
www.straitstimes.com
Published on May 04, 2013
Reits may be hit by tighter yields

Analysts prefer developers, especially those that have overseas exposure

By Alvin Foo

SHARES of local property developers, especially those with overseas exposure, are favoured ahead of real estate investment trusts (Reits), says Credit Suisse.

Reits could face tighter yields, analysts Yvonne Voon and Sing Ping Chok noted in a recent report. They said: "We still prefer developers to Reits."

Credit Suisse noted that property demand is shifting away from the residential sector into office, retail and industrial in the wake of the seventh round of cooling measures in January.

It warned that more of such tightening measures could come into play, "given the rising trend of foreign buying in the market and the risk of rising prices due to cost pressure".

While residential price growth has slowed down, office demand continues to surprise on the upside with 14 straight months of positive private net demand lifting the occupancy rate to 90 per cent.

Credit Suisse noted: "We expect office rents to be stable in the prime Grade A space, but potentially see downside risk for older offices."

Residential prices are tipped to stay relatively flat, but it expects a further 5 per cent to 10 per cent downside risk for the prime segment due to vacancy risks, given the oncoming supply and unsold units, compounded by weak rental demand.

Mass-market prices are expected to be slightly more resilient, supported by a relatively affordable price tag of less than $1.5 million, which seems to be "the sweet spot for upgraders and investment demand", Credit Suisse added.

Its analysts also warned that Singapore-centric developers could suffer from falling volumes and potential cost pressures.

They noted: "We expect residential prices to remain relatively flattish. Hence, we prefer developers with more overseas non-residential exposure such as CapitaMalls Asia (CMA) and Global Logistic Properties (GLP)."

CMA shares have gained just over 6 per cent thus far this year, closing at $2.06 yesterday.

GLP shares have inched up a mere 0.7 per cent this year, finishing at $2.80 yesterday.

One of the developers making headlines recently is CapitaLand, which reported a 41.2 per cent surge in net profit to $188.2 million for the three months ended March 31.

The stock tumbled six cents to $3.67 yesterday.

Maybank Kim Eng analyst Wilson Liew said: "We believe the sharpened focus in Singapore and China will underpin CapitaLand's growth going forward... Its diversified business model has shone through this quarter and we are positive on the sharpened focus under the new streamlined organisational structure."

He has a "buy" call on the counter with a $4.33 target price.

Reits have outperformed the benchmark Straits Times Index (STI) so far this year. For instance, the FTSE ST Reits sectoral index has surged more than 12 per cent, outgunning the STI's 6 per cent rise this year.

The Reit sector's surge, especially during last year, has led analysts to warn that yields could be hit by further compression over the year. Credit Suisse noted: "There could be more yield compression as Singapore Reits still provide a relatively attractive yield spread compared with other major Reit markets."

It estimated that total returns will be in the low- to mid-teen percentage levels, assuming a further 50 basis point compression to the current Singapore Reit average yield of 5.2 per cent.

Defensive Reits, such as retail and logistics ones, with a focus on acquisition, such as CapitaMall Trust and Mapletree Logistics Trust, are the broker's preferred picks. It warned of downside risk to office Reits due to increasing supply and industrial Reits in the light of weaker sectoral fundamentals.

alfoo@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
Reply
Philips SG Reits fund size now stands at $46.07M, as of 30 April, from $42M last month. Considering the fund gain of around 6.8% for the month, there is something around $1.2M of new money pumped in the funds.

Well... seems like people still interested in REITS.

http://www.fundsupermart.com/main/admin/...PHP009.pdf

Realised that they increased their payout from 1.5cents to 1.55cents for the quarter.
Reply
Probably time to exit the REIT bandwagon. But for those getting >10% yield maybe still reasonable to hold...
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
Reply
reits looks like a bubble in a making, just too much hot $$

time to be more careful
Reply
(16-05-2013, 07:00 PM)felixleong Wrote: reits looks like a bubble in a making, just too much hot $$

time to be more careful

The party will probably last longer than it should, and longer than most people expect.

But yes, I am sitting out on this one. Smile
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
Reply
(16-05-2013, 07:22 PM)Musicwhiz Wrote:
(16-05-2013, 07:00 PM)felixleong Wrote: reits looks like a bubble in a making, just too much hot $$

time to be more careful

The party will probably last longer than it should, and longer than most people expect.

But yes, I am sitting out on this one. Smile

I think that as long as there is no alternative, and there is no bad news, likely it is able to hold a little longer.

Really tough time to look for yields now....
Reply
The current market thinking is until the central bankers, (usually started by US) start to phase out QE and slowly increase bank interest rate, nothing going to change much; barring a "balck swan".

(16-05-2013, 12:42 PM)BlueKelah Wrote: Probably time to exit the REIT bandwagon. But for those getting >10% yield maybe still reasonable to hold...
i suppose your >10% yield is based on YOC. and not current yield. If there is one base on current yield, i would be very surprised and cautious.
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
Reply
as long as the music is playing... we dance ^^
Reply
Music Stopping? Suddenly everyone think that REITS is overvalued?
Reply
(23-05-2013, 11:54 AM)NTL Wrote: Music Stopping? Suddenly everyone think that REITS is overvalued?

I guess no one would know? Most important is to ensure that when we as investor buy, we make sure there is margin of safety in case something drastic occurs to affect the businesses we invest in.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
Reply


Forum Jump:


Users browsing this thread: 33 Guest(s)