General S-REITs Discussion Thread

[zeroX26]

Don't catch a falling knife.
Fed funds rate up to 5% in 2023.
T-bond yields continue to rise.
REITS dividend yield need to rise, i.e. share price need to drop.

Take FCT for example, assuming DPU remains unchanged at 12c, then share price need to drop to $1.70 for 2% risk premium over 5%. Current price $1.98 still too high.

Now DPU is also going to drop because debt financing was locked in at low interest. If debt will be refinanced at higher rate, how??? Forecast reduced DPU will continue to pressure the share price down.

That's a good point. Thank for the timely reminder.

 

[revhappy]

We have a generation of investors(under 40) who have been conditioned to believe that fixed income doesn't beat inflation, stocks only go up, FED has your back and money printer will go brrr and BTFD. Very difficult to change old habits. Just like boomers stayed away from stock investing because of scars of the Asian financial crisis, CLOB, dot-com bust, Sars, GFC etc

 

[abutan]

Don't catch a falling knife.
Fed funds rate up to 5% in 2023.
T-bond yields continue to rise.
REITS dividend yield need to rise, i.e. share price need to drop.

Take FCT for example, assuming DPU remains unchanged at 12c, then share price need to drop to $1.70 for 2% risk premium over 5%. Current price $1.98 still too high.

Now DPU is also going to drop because debt financing was locked in at low interest. If debt will be refinanced at higher rate, how??? Forecast reduced DPU will continue to pressure the share price down.

Then those who bought at 2.2x what do u suggest them to do?

 

[direbmem]

We have a generation of investors(under 40) who have been conditioned to believe that fixed income doesn't beat inflation, stocks only go up, FED has your back and money printer will go brrr and BTFD. Very difficult to change old habits. Just like boomers stayed away from stock investing because of scars of the Asian financial crisis, CLOB, dot-com bust, Sars, GFC etc

Fixed Income still doesn't beat inflation now. Though it is now better than than stocks.

 

[stanlawj]

Then those who bought at 2.2x what do u suggest them to do?

I can tell you what I did, I can't tell you what to do.
I bought at 2.44. Cut loss at 2.14.
Intend to buy back only after FCT acquires Mercatus' announced sale of assets and only after s**t hits the fan in USA. Still a long time more to go.

 

[zeroX26]

I can tell you what I did, I can't tell you what to do.
I bought at 2.44. Cut loss at 2.14.
Intend to buy back only after FCT acquires Mercatus' announced sale of assets and only after s**t hits the fan in USA. Still a long time more to go.

Boss, what if **** doesn't hit the fan in the US ?

 

[stanlawj]

Boss, what if **** doesn't hit the fan in the US ?

You mean s**t can fill up the whole room and not hit the fan? See below. In the meantime, the Fed is in control.
https://fred.stlouisfed.org/series/A091RC1Q027SBEA

 

[Shion]

Analysts downgrade raft of REITs following Fed statement on terminal rate​

https://www.theedgesingapore.com/ca...t-reits-following-fed-statement-terminal-rate
On Nov 3, Goldman Sachs downgraded Mapletree Pan Asia Commercial Trust, Keppel REIT and Frasers Centrepoint Trust to sells from neutral recommendations. Analysts recommending sells are rare but some have done so. (Take the stir that Citi created when it recommended a sell on Nanofilm which it reiterated also on Nov 3.)

The ratings cuts are because Goldman believes that costs will remain higher for longer (following the US Federal Reserve’s indication on Nov 3 that hikes could be gentler but the terminal rate could be higher). This also implies that the foreign exchange impact on DPU and mark-to-market valuations will be felt for longer.

While FCT does not carry foreign exchange risk, Goldman believes that Singapore risk-free rates are likely to stay elevated, and is now imputing a 3.5% risk free rate. Yields on 10-year Singapore Government Securities ended the week of Oct 31- Nov 4 at 3.5%, up from just 1.7% in January this year. A higher risk-free rate than originally anticipated will cause analysts to recalibrate their weighted average cost of capital, and reduce valuations for the REITs.

According to analysts, Suntec REIT’s 3Q2022 DPU of 2.08 cents was below consensus. JP Morgan, which already has an underweight on Suntec REIT because of its relatively lower quantum of fixed debt coupled with a high aggregate leverage, an anaemic interest coverage ratio, and the inability to raise equity, says divestments are a necessity.

“Management does not intend to raise equity to reduce gearing from the current 43.1%. Management guided that while office valuations are expected to remain stable in Singapore and Australia, there is potential downside to UK valuations. We believe that Suntec City strata offices represent the best divestment option, given still strong demand from family offices and high-net worth individuals (HNWI) for highfloor units,” JP Morgan says in an Oct 26 update. Its price target is $1.25. On Nov 4, JP Morgan reiterated its underweight call on Suntec REIT.

On Nov 4, JP Morgan downgraded Keppel REIT to an underweight. The recommendation appeared to be triggered by Keppel REIT’s latest announcements. On Oct 28, Keppel REIT announced it planned to reward unitholders by distributing $100 million from accumulated capital gains over the next five years leading up to its 20th anniversary in 2026.

Separately, Keppel REIT acquired a boutique property in Tokyo for JPY8.97 billion, with a DPU accretion of 0.5%. In an announcement on Oct 28, Tokyu REIT said it is divesting a property with book value of JPY4.285 billion to HSBC Institutional Trust Services, which is assumed to be the same said property that Keppel REIT is acquiring. Tokyu REIT's capital gain is likely to be JPY4.684 billion. Analysts are now confused about the price paid by Keppel REIT.

“Keppel REIT’s borrowing costs are expected to double to 4.0% by 2024 from 2.1% currently and gearing to edge closer to 40% following the Japan acquisition (link) and capital distribution plans,” JP Morgan observes.

Since early on this year, this missive has pointed out that rising risk-free rates were likely to impact REITs’ unit prices through the yield spread - and they have. Unfortunately, rising DPUs were not able to offset some of the impact of the yield spread to keep unit prices on an even keel simply because the rate hikes by the Fed were too fast and furious. Increasingly it appears that REITs’ unit prices may only be able to rally consistently once risk-free rates have peaked, and we await a signal from the Fed.

 

[homer123]

Illogical to downgrade FCT .. It has a good debt profile and retail in Spore has been increasing double digit Y-O-Y every month.

 

[revhappy]

Just noticed from Financial horse blog article, the Nikko AM APAC REITs ETF has 6.5% exposure to India. This is quite shocking, since Indian REITs market is at its infancy, there are only like 2-3 listed REITs there. I think this is bullishness on India taken a bit too far. @churnmaster

https://financialhorse.com/reit-etf...inflation-this-decade-as-a-singapore-investor

 

[TehSi99]

 

[Mephist0pheLes]

this guy has been quite bullish on REITs since iEdge S-REIT Leaders Index was 1370 six months ago. the index has since fallen by 20%. At that time i asked him isnt he concern about the rising interest? but i dont think he understands yield premium above risk free rates.

 

[limster]

this guy has been quite bullish on REITs since iEdge S-REIT Leaders Index was 1370 six months ago. the index has since fallen by 20%. At that time i asked him isnt he concern about the rising interest? but i dont think he understands yield premium above risk free rates.

From : https://thewokesalaryman.com/2022/06/01/why-most-of-us-wont-achieve-financial-independence-early/

I seriously hope most investors watch youtubers (and Cramer on CNBC) for entertainment, and that they actually do their own analysis before investing....

 

[revhappy]

this guy has been quite bullish on REITs since iEdge S-REIT Leaders Index was 1370 six months ago. the index has since fallen by 20%. At that time i asked him isnt he concern about the rising interest? but i dont think he understands yield premium above risk free rates.

Watched the video. He seems to know his stuff, just that he seems to be an optimistic person a bit like @Dividends Warrior. So with the same analysis a pessimistic person might decide not to invest until the prices fall further.

 

[boroangel]

Still way early to go into REITS. I do see REITs continuing this slow grind down for coming quarters, and EVEN if FED pauses the rate increases, interest rates are going to hold there for a couple of quarters before the FED would decrease it.

If it is going to take a year to reach there, it would be another year of grind down and pain for REITS I think. Saying that, those savers with T Bill, FDs, warchest all loaded, that inflexion point where FED keeps the rates unchanged I feel could be a good point to get into REITs locking in high rates.

 

[TehSi99]

Many people stucked in Reits, including me.

 

[TehSi99]

Watched the video. He seems to know his stuff, just that he seems to be an optimistic person a bit like @Dividends Warrior. So with the same analysis a pessimistic person might decide not to invest until the prices fall further.

Think he prefers to enter early than late. But it is still early to enter.
He has a long time horizon for Reits.

 

[HeiHeiHei]

very tempted to go back in.....

 

[prophetjul]

Not sure what some here expect from SREITs?
Consistent dividends or capital gain?

i am looking at consistent dividends. So i have been 'stuck' in SREITs since 2008.

 

[weng0202]

Not sure what some here expect from SREITs?
Consistent dividends or capital gain?

i am looking at consistent dividends. So i have been 'stuck' in SREITs since 2008.

Consistent dividends for me since I'm building fixed income for future retirement. Capital appreciation is a bonus when I decide to sell.