Reits & Business Trusts – Q3 review

With the dust settled on the results released by the Reits and Business Trusts in Q3, I spent some time to analyse the changes to Q2 and Q1 in hope of identifying any big themes to aid my investment decisions.

I like to share my observations with you below.

The table at the end of this post shows the recent market prices, last 4 quarters of DPU accumulated and the corresponding yields of the same list of Reits and Business Trust that I have been monitoring for a while.

(1) The average yield of this list of companies is 6.6% in Q3. This is the lowest average yield for this year so far. Q2 was 6.8% and Q1 was 7.4% for the same list of companies.

102058445-up-down-chart.530x298

 

(2) Out of these companies, 32 of them have a higher share price in Q3 than Q2. If we compare Q3 to Q1, the number goes up to 36. (Out of the list of 38)

My comments:

It appears that the investors’ risk appetite has increased over the 8 months this year so much so that they are now willing to accept lower yields for the same companies. This is despite the interest rate going up twice in US this year already.

The other plausible reason may be that investors have not found a better investment option (especially in Singapore when the interest rate is still low) and they are flushed with cash. Thus, they were willing to buy more shares at a higher price even if it means lower yields than what they used to receive.

One other reason could be that more and more people realise the benefits of investing in Reits and they are now “pouring” into the market to join the band wagon.

No matter what is the reason, I personally think that the share price of most Reits is on the toppish end. I have been progressively taking profits as the Reits’ share prices continue to climb and reinvesting in non-Reits company. 

Due to my divestment of Reits and investment elsewhere, the weightage of my non-Reits SGX blue chip companies is now bigger than the Reits. This hasn’t happened for a long time already. One thing I realise over the years of investing is that when people are “pouring in”, then it is the time to retreat and build up warchest 🙂

SReits – Time to take some profit

Do you have the same view? Happy to receive your views especially if you have an alternate view.

Gearing

(3) The 5 Reits/Business Trusts that have gained the most in terms of % increase in share price this year are: Asian Pay TV, Croesus Retail, CDL HTrust, Viva Industrial, Capitaland Commercial Trust.

The increase ranges from 16 to 32%. It seems that the increase is broad base and not specific to a particular business sector or country.

(4) The 5 on the other end of the spectrum (i.e “worst performers”) are Accordia Golf, ESR, SPH Reit, First Reit and Starhill.

Share prices of Accordia Golf and ESR decline year to date. The other 3 are almost flat. Interestingly enough, these 3 are the ones that I have been paying more interest in – they are the “boring” companies but they deliver consistent dividends without fail. I will look to accumulate more of them if their share prices drop drastically.

Business_As_Usual


(5) Another Interesting point, the 3 companies that managed to squeeze out positive yield increase (the rest declined) come from these “worst performers” – Accordia Golf (a +8% change in yields from Q3 to Q1), SPH Reit (a + 1.5% change) and ESR (almost no change in yield).

The rest of the 35 companies actually have a lower yield in Q3 compared to Q1. Their share prices are up but DPUs are generally NOT. 

In my opinion, this is something to be wary about …. I am a believer of reversion to mean market behaviour especially on dividend yield and this belief is reinforcing my investment decision to stay on the sideline for REITs at the moment.

Using Reversion to Mean for Reit Investments

Actually, I don’t see any significant catalyst for the share price increases lately. Do you? If you have, can you share with me for me to learn?

Just to share, I will continue to do selective profit taking with portions of my investments while continuing to ride this swelling tide. However, I am conscious and mentally prepared that a retreat may be looming round the corner. So, I will try not to panic if and when it happens.

Hope you find something useful for you in this post.

Take care and have a great investment time for the remaining days of this week.

Bye, Warriortan

References:

 Q3 2017 Price ($) DPU (cents) Yield (%)
Accordia Golf (Apr/Oct) 0.715 6.0 8.4%
AIMSMIREIT 1.390 10.8 7.8%
Ascendas (Apr/Oct) 2.640 15.4 5.8%
Ascendas India (Apr/Oct) 1.135 5.7 5.0%
AscendasHT (Apr/Oct) 0.835 5.7 6.8%
Ascott Reit (Jan/Jul) 1.215 6.4 5.2%
Asian Pay TV 0.575 6.5 11.3%
CACHE 0.890 7.3 8.2%
CapitaComm (Jan/Jul) 1.745 9.2 5.3%
CapitaMall 2.130 11.0 5.2%
CapitaRChina (Jan/Jul) 1.595 10.1 6.3%
CDL Htrust* (Jan/Jul) 1.620 10.1 6.2%
Croesus Retail (Jan/Jul) 1.195 7.9 6.6%
ESR Reit 0.555 4.0 7.1%
Far East Htrust 0.660 4.1 6.3%
First Reit 1.325 8.5 6.4%
Fraser Hospitality (Apr/Oct) 0.735 5.2 7.1%
FraserComm 1.400 9.9 7.1%
Frasers Logistics (Apr/Oct) 1.080 7.0 6.5%
FrasersCentrepointTrust 2.120 11.7 5.5%
Ireit (Jan/Jul) 0.765 5.8 7.5%
Keppel DC (Jan/Jul) 1.300 7.2 5.5%
Keppel Reit 1.165 5.8 5.0%
LippoMapleT 0.430 3.5 8.2%
MapleTree Commercial 1.560 9.1 5.8%
MapleTree GCC (Apr/Octl) 1.120 6.6 5.9%
MapleTree Industrial 1.850 11.5 6.2%
MapleTree Logistics 1.215 7.5 6.2%
MaulifeReit (Jan/Jul) 0.950 6.6 6.9%
OUE Com Reit (Jan/Jul) 0.715 5.1 7.1%
OUE HT 0.745 5.2 7.0%
ParkLife REIT 2.700 12.7 4.7%
Sabana 0.475 3.5 7.3%
SoilBuildBizReit 0.715 5.9 8.3%
SPH Reit 0.990 5.5 5.6%
Starhill Global 0.755 4.9 6.5%
Suntec Reit 1.875 9.4 5.0%
VIVA ind Trust 0.925 7.3 7.9%
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