It hasn’t been an easy time for REITs this past week.
With news of impending interest rate increases due to rising inflation, the sector has taken it on the chin.
REITs fund their operations and acquisitions through bank loans and borrowings, so a rise in interest rates will translate to higher interest costs when REITs refinance their debt.
Higher rates also mean that REIT yields may look less attractive as there are now more alternatives for investors who are seeking to park their money in suitable investments.
The fall in REIT unit prices across the board may represent an opportunity for an income-focused investor to scoop up shares of quality, beaten-down REITs.
Here are four Singapore REITs that are hitting a year-low that may present a bargain for investors.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, invests in a diversified portfolio of logistics real estate.
As of 30 September 2021, the REIT’s portfolio comprised 163 properties in Singapore, Hong Kong SAR, China, Japan, Australia, South Korea, Malaysia, Vietnam, and India worth around S$10.8 billion.
MLT recently closed at S$1.78, close to its one-year low of S$1.75.
The REIT reported a respectable set of earnings for its fiscal 2022 first half (1H2022) ended 30 September 2021.
Gross revenue climbed by 24.4% year on year to S$328.8 million while net property income (NPI) rose 21.4% year on year to S$288.6 million.
Distribution per unit (DPU) inched up 5.7% year on year to S$0.04334 due to a higher number of issued units.
MLT’s units offer an annualised distribution yield of 4.9%.
The REIT has seen its DPU rise without interruption since FY2016.
MLT continues to be active in acquisitions, with its latest being the S$1.4 billion purchase of 17 modern Grade-A logistics assets in China, Vietnam, and Japan.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT that owns 20 data centres across nine countries as of 30 September 2021.
Assets under management (AUM) stands at S$3.3 billion.
The REIT’s unit price recently hit a 52-week low of S$2.31.
Keppel DC REIT has reported steady growth in its DPU for the first nine months of 2021 (9M2021).
Gross revenue and NPI increased by 6.7% and 6.2% year on year, respectively.
DPU rose by 9.7% year on year to S$0.07386 for 9M2021.
Based on an annualised DPU of S$0.09848, the REIT’s units offer a forward distribution yield of around 4.3%.
Keppel DC REIT recently acquired its second data centre in London in a DPU-accretive acquisition that also improved the portfolio’s weighted average lease expiry (WALE) from 7.7 years to 8.1 years.
With a gearing level of 35.1%, the REIT has significant debt headroom for more acquisitions in the future.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT with an AUM of S$8.5 billion as of 30 September 2021.
Its portfolio consists of 86 properties in Singapore and 57 properties in the US.
MIT recently closed at S$2.62, not far from its 52-week low of S$2.51.
For 1H2022, the REIT reported a 40.1% year on year jump in gross revenue to S$283.6 million due mainly to the consolidation of revenue from the acquisition of 14 data centres.
DPU rose by 14.2% year on year to S$0.0682.
The REIT’s units offer an annualised forward distribution yield of 5.2%.
MIT has had an enviable track record of raising its DPU every single year since the fiscal year 2012.
The REIT’s portfolio occupancy remained high at 93.7% and it had a gearing level of 39.7% with more than S$1 billion of committed loan facilities available.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is one of the largest suburban mall owners in Singapore with an AUM of around S$6.1 billion as of 30 September 2021.
Its portfolio consists of nine retail malls and an office building with over 2.2 million square feet of retail net lettable area.
FCT’s unit price recently closed at S$2.26, just a whisker above its 52-week low of S$2.22.
The REIT’s fiscal year 2021 (FY2021) earnings saw a big jump in both gross revenue and NPI due to the acquisition of five malls from AsiaRetail Funds (ARF).
Gross revenue surged by 107.5% year on year to S$341.1 million while NPI more than doubled year on year to S$246.6 million.
DPU surged by 33.7% year on year to S$0.12085.
Historical distribution yield stood at 5.3%.
FCT managed to bring in new tenants to its malls to refresh its tenant mix despite the ongoing challenges brought about by COVID-19 restrictions.
With a gearing level of just 33.3%, the REIT has significant room to tap on debt for more yield-accretive acquisitions.
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Disclaimer: Royston Yang owns shares of Keppel DC REIT and Mapletree Industrial Trust.
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