Analysing REITS

[Musicwhiz]

This article should probably belong in this thread.

Link: http://www.channelnewsasia.com/stories/s...92/1/.html

REITs still viewed as attractive investments
By Lynda Hong | Posted: 12 November 2012 2345 hrs

SINGAPORE : Singapore Real Estate Investment Trusts (S-REITs) have outperformed the STI significantly as at end-October this year.

And some investors are expecting the good run to continue, driven by capital inflows from stimulus measures in the US.

But some analysts warn that the performance of S-REITs may have peaked.

Market volatility and economic uncertainties are expected to continue to drive demand for REITS which are seen to be less risky and provide steady returns at the same time.

According to OCBC Investment Research, the FTSE ST REIT Index has outperformed the STI by 11 percent since September 13.

That's when US Federal Reserve announced the third round of quantitative easing (QE3).

Prior to the Fed announcement, analysts say the FTSE ST REIT Index was six percent higher than the STI since the beginning of 2012.

Eli Lee, Investment analyst, OCBC Investment Research, said: "QE3 has brought about a greater magnitude to a present trend we are seeing today. The yield for the sector is still very attractive at 6.1 percent. And also on a relative basis to say 10-year Treasury yields. The unique thing is that S-REITs have a very attractive spread relative to our 10-year government yield rates, hovering above 450 to 470 basis points, which is a significantly larger spread to other similar markets like Hong Kong or Japan."

Analysts expect the Federal Reserve to press on with its efforts to spur growth in the US by keeping a loose monetary policy.

And that could see more capital inflows into both REITs and the property market in Singapore.

In fact, a recent survey conducted by the Real Estate Developers' Association of Singapore showed that nearly 7 in 10 respondents believe more funds will flow into REITS as a result of QE3.

But analysts say performance of REITS may have peaked as higher share prices continue to compress yields.

They add that rising construction costs and property prices also make it harder for REIT managers to look for ways to grow.

Roger Tan, CEO of SIAS Research, said: "REITs have enjoyed good times in 2012, it may just be a stable dividend yield, stable capital gain. (In 2013) probably zero capital gain or small capital gain, considering their ability to generate more or higher revenues and (with) M&A activities now a lot lower. So I think investors may flow funds into physical property instead of the REITs itself."

Still, analysts say S-REITS present an attractive investment proposition with average yields of 5 to 6 percent compared to other investments.

In a report out last month, Credit Suisse said within the S-REIT space, retail REITs have the most resilient fundamentals as their rentals and occupancies tend to hold up better than those in the industrial segment.

- CNA/ch

[zhangwuji]

Hi，

Can someone enlighten me on how can we sell our right to subscribe when there is a cash call?

Thank you very much in advance.[/align]

[Musicwhiz]

The Straits Times
www.straitstimes.com
Published on Mar 16, 2013
PLAY OF THE WEEK
The frenzy evoked by Reits
Mapletree's trust up 14% since listing; SPH share price soars on news of possible Reit

By Goh Eng Yeow Senior correspondent

INVESTORS have not taken their eyes off Mapletree Greater China Commercial Trust (MGCCT) since it made its debut on the Singapore Exchange (SGX) more than a week ago.

Buying interest in the newly listed real estate investment trust (Reit) was so buoyant that an average 28.1 million units were traded daily during the week.

It closed at $1.06 yesterday, up a further 0.95 per cent for the week. The Reit is now up 14 per cent from its issue price of 93 cents since it started trading on March 7.

Reits are "closed-end" funds that operate in a similar manner to unit trusts. But unlike unit trusts, which invest in shares, Reits specialise in income-generating real estate assets such as shopping malls, offices and industrial buildings.

What makes them so popular is their relatively high dividend payout, since they are obliged to declare at least 90 per cent of their income as dividends to qualify for tax breaks.

Another attraction is their tax-efficient structure, since Reits do not pay income tax at the corporate level; individual investors, too, are exempt from paying any taxes on the dividend income received.

That makes them a much-sought after investment in the current low-interest rate environment, with banks paying next-to-nothing returns for savings deposits.

As a gauge of how hard-up investors are for high-yielding defensive plays, MGCCT's retail tranche of 215.1 million units was 8.9 times subscribed, while the institutional tranche, which made up two-thirds of the offer, was 38.1 times subscribed.

So it was not surprising to find investors cheering after Singapore Press Holdings (SPH) said it was mulling over the setting up of an SGX-listed Reit.

In their stampede to get a slice of SPH, they drove the media group's share price to a five-year high; it gained 35 cents, or 8.39 per cent, for the week to end at $4.52 yesterday.

SPH's announcement sent analysts into overdrive, working out the benefits it might derive from such a spin-off.

OCBC Investment Research analyst Eli Lee said SPH may inject two malls - Paragon and Clementi Mall - into the proposed Reit, with a third, Seletar Mall, positioned as a pipeline asset.

"Assuming that SPH retains a 51 per cent stake in the Reit, we estimate potential divestment gains of $625 million to $744 million," she added, as she hoisted SPH's target price up to $4.94.

UOB Kay Hian analyst Nancy Wei said the real boost to the media giant's share price "would be a large special dividend as SPH could reap cash proceeds of up to $1.46 billion if its stake in the Reit is reduced to 30 per cent".

She anticipated the new Reit to have a market cap of $2.087 billion upon listing.

Similarly, DBS Vickers analyst Andy Sim, who raised his target price for SPH to $4.79, noted that the establishment of a Reit would be a "trigger for share price outperformance and unlocking value for shareholders".

But it is not just Singapore where investors are falling madly in love with Reit initial public offerings.

Over in Hong Kong, there is a strong demand for defensive Reit plays as well. This has lured the city's developers into trying to monetise part of their property portfolios.

Hong Kong-listed New World Developments, for example, said over a week ago that it is considering the possibility of a separate listing for certain of its hospitality assets.

engyeow@sph.com.sg

[safetyfirst]

Hi，

Can someone enlighten me on how can we sell our right to subscribe when there is a cash call?

Thank you very much in advance.[/align]

If a company issues rights, you will be credited with rights into yr cdp.

You may choose to exercise the rights, which means coughing out more money, to subscribe to more shares in the company
OR
you may choose to sell these rights in the open market

[a74henry]

Hi，

Can someone enlighten me on how can we sell our right to subscribe when there is a cash call?

Thank you very much in advance.[/align]

Once the counter goes ex-rights, your CDP account will be credited with the rights and you should receive a letter on the number of units you are entitled to subscribe to.

You can excercise your rights to subscibe via mailing the letter back with a cashier order. Alternativelt, the safer method is apply via ATM.

I prefer applying via ATM as it is cheaper, more convenient and documented (I have an ATM receipt).

If you like my advice, please click to increase my reputation. Thanks.

[Musicwhiz]

If you like my advice, please click to increase my reputation. Thanks.

We aim to foster a community of people who share because of altruistic reasons. Therefore, reputation increases should be given without asking. I strongly discourage asking for reputation points just for giving advice.

Thanks.

[Temperament]

If you like my advice, please click to increase my reputation. Thanks.

We aim to foster a community of people who share because of altruistic reasons. Therefore, reputation increases should be given without asking. I strongly discourage asking for reputation points just for giving advice.

Thanks.

Yes! Fully agree. There is always a vast difference between the solicited and unsolicited. Just as from your Heart is vastly difference from your Mind. And no advice suits everybody.

[felixleong]

why reputation is impt here?
here is not sammy boy forum wor hehehe

[zhangwuji]

Hi a74hendry and safety first,

Thanks for the info.

I don't know what the reputation point can do for you a74. Anyway, to show my appreciation, I have just added a point for you. Same for safetyfirst.

[Musicwhiz]

The Businesss Times
Published March 19, 2013
S-Reits face risks from debt reliance: Fitch
By Ong Chor Hao

SINGAPORE real estate investment trusts (S-Reits) are exposing themselves to various risks as they rely more and more on debt financing, a trend that is likely to continue this year, according to Fitch Ratings.

The uncertainties include refinancing risk and exposure to interest-rate shocks, while the increasing use of debt in S-Reits' funding mixes stems from low interest rates and demand for dividend distribution amid falling asset yields, Fitch said in a report released yesterday.

"The availability of low-cost debt capital has led to the increasing use of debt to fund asset acquisitions, new developments, asset improvement programmes and unitholder payments," it said.

This trend is likely to continue this year, and "competition for assets that results from the use of leverage will put downward pressure on underlying asset yields", Fitch noted.

S-Reits have benefited from falling short-term interest rates in terms of funding costs over the past six years, but they may face issues with covering debt payments if rates normalise.

Reits here generally have a weak liquidity profile because of a reliance on short-term debt, Fitch pointed out, citing as a reason the short-dated maturity of leases on commercial property, which limits funding options.

"In the event of a sudden move to higher interest rates, the gap between asset yields and interest rates would widen owing to the much slower pace at which asset yields are prone to self-correct," it added.

If interest rates do go up, S-Reits can switch to secured borrowings or securitisation as most of their assets are unencumbered. They could also dispose of assets or raise equity to cover fixed charges.

There are also broader risks for S-Reits. The pace of supply is outstripping demand for space, and a threat of higher vacancy rates looms as a result.

"Fitch expects this trend to accelerate in 2013 and to therefore increase the exposure of the S-Reit sector to a sustained macroeconomic downturn."

That said, S-Reits are still a fairly resilient asset class, Fitch believes.

It expects revenues to grow across all segments of the S-Reit sector this year. As for profitability - measured by net property income (NPI) and earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs (Ebitdar) - Fitch expects fairly stable NPI but a slight decline in Ebitdar.

"The revenues and profitability of the S-Reit sector are underpinned by the strong economic fundamentals of Singapore," it said, pointing to S-Reits' higher revenues and margins during the 2008-2009 global financial crisis, as testament to their robust and defensive earnings profile.