07/2020
S-REITs did a remarkable comeback in 2Q2020 to end 1H2020 down only 11.53% at 816.82 on the FTSE REIT Index after plunging to as low as 602.64 when markets reached its ebb on Mon 23 Mar 2020.Prior to that, S-REITs collapsed 367.98 points or 37.91% as the FTSE REIT Index crashed from 970.62 on Wed 19 Feb 2020 to 602.64 on Mon 23 Mar 2020, over a period of just 22 market days as Covid-19 swept the globe!
This fierce sell-off was the worst ever in S-REIT history and exceeded the previous record of October 2008, where in the throes of the Global Financial Crisis (GFC), 34.67% in value was wiped off in a single month.
In 2019, S-REITs had one of the best performing year in with the FTSE REIT Index went up a solid 15.53% to close at 920.43. Including dividends, S-REITs posted a stupendous total return of 20.83%! S-REITs trounced stocks as the FTSTI index was only up 4.78% closing at 3,222.83 on 31st Dec 2019.
Once again as REITs recovered, they continued to trounce stocks as the FTSTI index closed down 19.64% at 2,581.91 on 29 Jun 2020. Once again, REITs continued to exhibit more resilient characteristics compared to Equities. This behavior was replicated in the US REIT market, most of the developed European REIT markets like the Netherlands, Belgium and Germany and many of the established Asia REIT markets.
Over the past three years, we had advocated a strong positioning in S-REITs in our various REITS investment classes, Forums and Symposiums attended by more than 3,000 investors in South-East Asia. Our focus is always like the Eye of the Tiger – we help you pause and wait before pouncing on the right REIT for profit and wealth optimization. Again in April 2019, we had continued to stress the strong prospects of S-REITs in our tactical research https://gcpglobalsg.wixsite.com/gcpglobal/post/sreits-has-had-a-great-run-in-1q2019-what-s-next
Best Performing REITs in 1H2020
We had handpicked the MACFK (Mapletrees, Ascendas, Capitaland, Frasers and Keppel group of REITs) to spearhead the REIT rally for our investment audience earlier three years ago. Not surprisingly, 8 out of the Top 10 Best REITs for 1H2020 belonged to the MACFK family, our most preferred REITS which we have always recommended in our classes. The continual outperformance and resilience of the MACFK clearly underlie their multi-varied strengths which we have taught in our REITs Quarterly Classes for the past 11 years.
In 2019, we were accurate and correct in our picks again as 7 out of the Top 10 Performing REITS came from the MACFK family. In fact, the gains of more than 20% in 2019 achieved by the Top 10, was last seen in 1H2013 before the “Taper Tantrums” correction. Including their DPU payouts, the Total Returns for the Top 10 REITs would have notched up Total Returns of 25.2% - 40.01%, smashing returns compared to Equities which posted gains of only 8.3% for 2019.
Like the Eye of the Tiger, we focus on tactical switches at the right market timing and warn on REITs that are weak before they are mauled by the Tiger.
Characteristics of the Best Performing REITs in 1H2020
At GCP Global, we don’t just look at academic parameters to make judgement calls. Our comprehensive approach to engage our investor students with the Top REIT management, Investors Trips, Investor Symposiums and Investor Forums are integral in the REIT Tactical Switches and Recommendation process.
Going into the Covid-19 Pandemic sell-off, we have picked the Large Industrial REITs, Data Centre REITs and Healthcare REITs to be the most resilient. Covid-19 amplified the critical role that supply change management, logistics and e-commerce play. The share prices of the larger industrial REITs like Ascendas REIT, Mapletree Logistics Trust (MLT), and Mapletree Industrial Trust (MIT), recovered to within 10 – 15% of their pre-crisis prices during the rebound that followed the crash. Keppel DC REIT which own data centers, actually saw its share price challenged its pre-crisis price within four weeks of the low reached on 23 Mar 2020. Parkway Life REIT was as responsive to the rebound as it has been resilient on the sell-down.
Worst Performing REITs in 1H2020
The above Table 3 shows the Worst-10 Performing REITs lost between 26.88% - 74.86% of their value during the Covid-19 Pandemic sell-down. Most of the Hospitality REITs including Eagle Hospitality Trust, ARA Hospitality Trust, CDL HT, Frasers HT and Far East HT are in the Hospitality sector. This was a sector that we had warned out student investors to AVOID in January 2020 when many stockbroking firms were recommending a BUY.
Both Lippomalls and OUE Commercial REITs were the other REITs that we have told our student investors to AVOID in our various Quarterly REIT classes, monthly write-ups and symposiums prior to 2019.
We had previously warned on staying away from REITs that are Value Traps like Lippomalls, OUE Commercial Trust, Soilbuild REIT and Eagle Hospitality REIT. Not surprisingly, almost all of these REITs are the Worst Performing REITs in 1H2020. Like the Eye of the Tiger, we are always hunting and looking to warn on REITs that are weak before they are mauled by the Tiger.
What does Covid-19 teach you about REITs?
Why are doctors so confident in being able to differentiate between a heart attack and a headache? This is because they extensively study the symptoms of both. Similarly at GCP Global, we have trained our student investors to avoid Value Traps for the past 3 decades by extensively studying the early symptoms and issuing warnings way in advance on REITs.
Heart attacks and strokes, the seizure can come anytime and send the victims into sharp pain and possible convulsions. Similarly, the Covid-19 Crisis was another episode that highlighted that there are Good REITs and there are Not-so-good REITs. During a Crisis, it will cause convulsions which can result in sharp pain in an investment portfolio, but the Strong REITs are the ones that rebound the fastest while the Not-so-strong REITs will rebound the least and slowest.
At GCP Global, we keep you informed of S-REITs closely, especially analyzing in-depth each of the various acquisitions as we believe these hold the key to outperformance of SREITs and separating the goat from the sheep in the REIT sector.
Given the conducive cost of capital, we expect S-REITs to continue to pursue acquisitions with the same zeal, as they did in 2019, in 2H2020 after Covid-19 subside. Depending on how the deal is financed (as shown in Keppel DC case), cost of funds and how the new assets will bolster underlying DPUs, all these can combine to result in a potential reflation in their share prices. We analyze that for you in our classes and our next class is on 1 Aug 2020. Do sign up here where we show you the potential winners before their share prices rise.
Going forward, the lynchpin for outperformance would lie in acquisitions. REITs that make DPU and Yield accretive acquisitions should be on investors’ radar. This is a key area of our expertise as we dice and slice, toss and answer in our Quarterly REITS and Master REITS classes which will outperform and which to Avoid. Like the Eye of the Tiger, we go into meticulous dissection of each REIT in our classes, so that investors are not caught fleet-footed when the tiger pounces.
Over the past decade, we have educated more than 6,000 HNI and UHNI investors, boutique funds and Family Offices across Asia in our various Quarterly REITS and Master REITS classes. Many of our student investors are actually Top Medical Specialists, Surgeons, Lawyers and Key corporate personnel who rely on us to keep sharp the Eye of the Tiger in REITs.
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