Reits offer defensive plays in shaky times

Reits offer defensive plays in shaky times


Trusts provide diversified, stable portfolio for investors wary of volatile markets


By Fiona Chan


WITH the dramatic dives and equally dramatic rebounds in stock markets recently, investors with frayed nerves may want to put their money in more cautious channels.


Some of the most obvious defensive plays are real estate investment trusts (Reits), which get their income from collecting rents in the properties they own.


Several Singapore-listed Reits, or S-Reits, have reported their full-year or quarterly results in the last week or so, with all showing better payouts.


Analysts say Reits appear as an attractive option to investors looking for a more stable and diversified portfolio.


‘The market could remain volatile for a while, and I think investors should include Reits as part of their portfolios for a more balanced approach,’ said Mr Wilson Liew, a property analyst at Kim Eng Research.


‘Prices of most Reits have tumbled with the rest of the market, making their distribution yields very attractive at this point in time,’ he added.


Mr Liew said he would advocate Reits with ‘more visible earnings streams’.


Hotel rates, for instance, are forecast to keep rising.


This will clearly benefit City Developments’ CDL Hospitality Trust – ‘probably the best Reit proxy to the hospitality sector’.


‘Likewise, the office and retail sectors in Singapore are expected to remain strong, and distribution yields could possibly exceed expectations this year,’ he added.


One trust that has come up tops in many analysts’ recommendations lately is CapitaMall Trust.


It owns 13 shopping centres, ranging from the stylish Raffles City to the more suburban Tampines Mall.


Citigroup has upgraded CapitaMall Trust to a ‘buy’, saying it is the best-managed Reit at an attractive valuation.


‘We think the recent selldown is overdone and is an opportunity to buy CapitaMall Trust, which has the best track record in asset enhancement initiatives,’ the bank said in a report this week.


Citigroup has a target price of $3.67 on the trust, which gained 28 cents to close at $3.18 on Friday.


‘The malls continue to see improvements in net property income,’ the report said.


‘While revenue was up 1 per cent quarter-on-quarter in the fourth quarter last year, net property income is 5 per cent higher.’


It added: ‘Renewal rates are still some 12 per cent on average above preceding rates.’


In a research report last month, OCBC Investment Research’s Winston Liew recommended that investors be more discerning when choosing their Reits.


He cited, as a reason, the uncertain outlook for the debt and equity markets this year.


‘We prefer S-Reits positioned in the more resilient retail or commercial sector, with a unit price trading at or below book value, and those that are delivering high yield and have low gearing and low capital needs,’ Mr Liew said.


He warned that the rising cost of capital in today’s markets could impact the funding activities of Reits, which relied heavily on new acquisitions for growth.


Also, a lack of available assets in Singapore – after a surge of new Reits mopped up all the attractive properties – has compromised the growth-via-acquisition route, making the road ahead for Reit growth shaky, said Mr Liew.


Source: Straits Times

Lee Hsien Yang’s in-laws buy unit in F&N-built condo

Lee Hsien Yang’s in-laws buy unit in F&N-built condo


FRASER & Neave (F&N) chairman Lee Hsien Yang’s in-laws have bought a unit in one of the company’s condominium projects.


Mrs Lim Chong Yah, who is Mr Lee’s mother-in-law, and his sister-in-law, Ms Lin Xueling, paid $2.66 million for an apartment in the 99-year leasehold Soleil @ Sinaran in Novena.


The 417-unit twin block project is being developed by Riverside Investments, a wholly-owned subsidiary of F&N’s property arm, Frasers Centrepoint.


In a filing with the Singapore Exchange on Friday, F&N said Mr Lee’s relatives were walk-in customers during the public sale.


According to the statement, no discount was given and the price was based on the prevailing approved price list at the time of sale.


‘The audit committee is satisfied that the number and terms of the sale are fair and reasonable, and the audit committee and board are satisfied that the terms of the sale are not prejudicial to the interests of the company and its minority shareholders,’ said the company.


Source: Straits Times