Analysing REITS

[Nick]

Earlier this week, Kim Eng released a report with a 'Neutral' call of REITs.

https://docs.google.com/viewer?a=v&pid=f...1KATQBAXYy

[NTL]

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.

Yeah, I also don't know.

Just see if there is any news over the long weekend then. No action taken.

[felixleong]

Saw some reits dropping 5%, baby bear looking for some milk, good luck all

[NTL]

Saw some reits dropping 5%, baby bear looking for some milk, good luck all

Then baby bull coming for more grass after baby bear finish its milk.

[NTL]

Came across this announcement by FCOT.

http://info.sgx.com/webcoranncatth.nsf/V...A0035A79E/$file/CSC_receives_PP_from_URA.pdf?openelement

In the announcement, it states the following:

"The PP was granted subject to the terms and conditions which include, amongst others, the following:
- 16,000 sqm additional gross floor area (“GFA”) for hotel use;
- approval of the rezoning of the site from white at gross plot ratio 4.2 to white without gross plot ratio; and
- payment of development charges or differential premiums, if any"

Anyone have any idea what is "white without gross plot ratio"?

Thank you in advance.

[felixleong]

reits crashed again today
another 2-5% bear attack
GG
RIP

[NTL]

From The Edge Weekend comment:

Are REITs now a bargain?
By Joan Ng

Regional markets continued their slide today on the back of worries about the tapering off of quantitative easing in the US. The Straits Times Index fell 0.7% to close at 3,311.4 points. Meanwhile, the MSCI Asia Pacific Index is headed for its second weekly drop. In fact, the regional benchmark is down 4.8% for the month of May – its first monthly decline since October, according to data compiled by Bloomberg.

Shane Oliver, head of investment strategy at AMP Capital, thinks the share market correction could still continue. But Oliver isn’t overly pessimistic about the decline. “It’s worth noting that the global volatility of the last few weeks has a radically different feel to that seen in each of the last three years,” says Oliver. “This time around there hasn’t been a peep out of Europe and more importantly bond yields have gone up rather than down.”

At its core, Oliver says, the present stock market volatility is about the US Federal Reserve getting close to achieving its aim of getting the US economy back on to a stronger footing. As the authorities try to decide when the US economy can start to be taken off life support, investors are trying to figure out what this will mean in terms of bond yields and high-yield share plays that have benefitted from low bond yields.

“But it’s a far better problem to have than the risk of a return to global recession that hung over investors in the past few years. As a result, we remain of the view that recent volatility is a correction that will give way to a resumption of the rising trend in share markets,” Oliver adds.

Will there be a 1994-style bond crash? Oliver doesn’t think so as “growth is still a long way from booming, spare capacity remains immense, bank lending is still subdued and inflation is low.” He also thinks the market correction will be mild, in the region of 5% to 10%, rather than the 15% to 20% falls seen in 2010 and 2011. “Shares are far from expensive, monetary conditions are likely to remain very easy with interest rate hikes a long way off, and the gradually strengthening global growth outlook points to stronger profits ahead.”

So should investors be looking to load up on some stocks that have seen their share prices decline recently? Tricia Song, an analyst at Barclays Bank Singapore, certainly thinks so. In a report today, Song suggests that the market sell-down of real estate investment trusts (REITs) is premature. “We do not expect the Fed to cut back its bond purchases until 2014, versus the market’s expectation of 2H2013,” says Song. She notes that the FTSE ST REIT Index has fallen 10% from a 52-week high of 890 points on May 15. On average, she calculates that the locally-listed REITs now trade at yields of 6% to 6.2%, implying a spread of roughly 440 basis points against the Singapore 10-year Government Bond.

“We continue to believe that Singapore REITs’ valuations are not expensive,” Song adds. She suggests that investors look at REITs that can grow faster even when interest rates move up. Her top pick at the moment is Keppel REIT. She sees the REIT benefiting from a prime office upturn. Also, Keppel Corp has pared its stake in the REIT. This will improve free float and should help support share prices. Song is also positive on CapitaCommercial Trust because of its office portfolio. And she sees future growth from asset enhancement initiatives on its Six Battery Road and Raffles City Tower properties.

DMG & Partners Research analyst Pang Ti Wee, however, says that the risk in the REIT sector is definitely greater now. “Although we do not expect the global outlook, high liquidity and prolonged low interest rate environment to change in the near term, a closer examination indicated that if any of these factors are to change, it could potentially result in a sell-down in REITs. In our view, given the high sector valuations, the risk-reward profile is less sanguine than before,” Pang says.
Maybank-Kim Eng Research analyst Ong Kian Lin suggests investors hold REITs with defensive portfolios that have upside for distributions per unit (DPUs). Given that analysis shows that retail REITs have the highest DPU growth, Ong currently has “buy” calls on Suntec REIT, CapitaMall Trust and Starhill Global REIT.

[evolance]

Tink it may start to get very speculative fr here onwards, any gd news reported on US job data=> speculatation interest rate goes up,REIT falls, bad news reported=>REIT spike up..

Shd Divested REIt, sector reprofiling/rotation..wait for reit to nearer to NAV again then buy again? Of cos,if it nv reaches near nav value,means sector rotation again out of high dividend yield stock?

but suntec n starhill is looking v gd bargain as it well below nav?

[Musicwhiz]

The Straits Times
www.straitstimes.com
Published on Jun 01, 2013
Invest
Buying opportunity after Reits rout
Analysts believe 9.3% plunge last month may be overdone

By Alvin Foo

INVESTORS in real estate investment trusts (Reits) here seem to have taken the old stock market mantra of "sell in May and stay away" to heart.

Singapore Reits were ravaged last month, mostly on fears that the United States Federal Reserve will be slowing down its massive monetary stimulus prematurely.

But analysts suggest the recent Reit rout may present a buying opportunity for several of these counters. They say the rush for the exit may have been overdone.

The bloodletting began last week, with the FTSE ST Reit Index slumping 4.5 per cent in those five trading sessions for its worst one-week slide since June 2009.

This was followed by a 5.2-per cent plunge this week as these worries intensified, leaving the index down 9.3 per cent for May.

The mayhem saw some Reit counters, such as Cambridge Industrial Trust and Fortune Reit, sinking 6 per cent in a mere day.

In a bid to kick-start the sluggish but now improving US economy, the Fed has been buying US$85 billion (S$107 billion) in bonds a month. This loose monetary policy is called quantitative easing (QE).

But global markets were rattled in recent days by Fed chairman Ben Bernanke's comments that the monthly bond purchases might be slowed down if US job rates show sustained improvement.

An abrupt end to QE and a rise in interest rates would hurt Reits, as it would increase refinancing costs and make it harder for them to raise funds.

However, several local analysts are not overly concerned.

"The concern is premature and we do not expect the Fed to cut back its bond purchases until 2014 versus the market's expectation of the second half of 2013," said Barclays analyst Tricia Song.

CIMB noted: "Our strategists and economists expect a more orderly rollback of QE closer to year-end, in conjunction with stronger US economic growth. They do not expect a one-off withdrawal or sharp withdrawal when the recovery remains fragile."

In addition, Deutsche Bank Markets Research believes the recent selldown reflected a re-rating of the Reit sector.

The sector's price-to-book ratio of 1.3 was above long-term averages of 1.1, it said. This is the ratio of the company's stock price to its book value, that is, what the company is said to be worth overall.

But analysts still say the sector is attractive for its defensive nature, given increasingly cautious market conditions.

CIMB noted: "The sector's defensive nature will hold up well in a tactically cautious environment, while debt maturity is fairly well-staggered to minimise the impact of any spike in interest costs on refinancing."

Barclays' Ms Song said: "We continue to believe that Singapore Reits' valuations are not expensive... we would accumulate on dips - our top picks are Keppel Reit and CapitaCommercial Trust."

CIMB sees buying opportunities for Ascendas Reit, Frasers Centrepoint Trust, Frasers Commercial Trust and Cambridge Industrial Trust.

Standard Chartered noted that in the recent first-quarter earnings season, retail landlords outperformed its expectations while hotel Reits saw revenue decline.

It noted in a May 8 report: "We believe valuations are not far from the peak, and we see just 10 per cent upside from here unless interest rates stay low for a prolonged period."

alfoo@sph.com.sg

[Greenrookie]

How do you guys analyse REITs?

For quantitative:
I mainly look at NAV, debt/market cap (<0.5), gearing ratio(<0.5)

For qualitative:
I look at ability to maintain dividend payouts for next 3-5 years:
- Quality of properties in portfolio? Diversified?
- Occupancy rate?
- Leases secured till?
- Future growth/plans?
-Ability to increase rental?
Large amounts of debt due only in 3-4 years time?

I look at Price/NAV to see if the REIT is undervalued.

I know DCF can be done on REITs. What starting figure to use for DCF calculation? I know there are FFO and AFFO (similiar to cash flow and free cash flow for companies). How to obtain this FFO since depreciation is accounted for in the income statements?

Hoping someone can shed some light on this.

Dear guys,

Anyone knows when the rent from tenant kicks in? I ask because I See that lippo mall has got Carrefour as a tenant from June 14 onwards at Pluit village mall. I am just wondering if the rent has already being factored in, since carrerfour would have start renovation way before that?

Sorry if my question sound silly