07/2019
SREITS has had one of the best performing half-year in 1H2019 with the FTSTI REIT Index up a solid 17.943% to close at 916.35 while only of the 40 SREITS, namely newly-listed Eagle Hospitality Trust, posting negative returns in 1H2019.
Over the past 18 months, we had advocated a strong positioning in SREITS in our various REITS investment classes, Forums and Symposiums attended by more than 3,000 investors in South-East Asia. Again, in April, we continued to stress the strong prospects of SREITS in our tactical research
As we handpicked the MAC (Mapletrees, Ascendas and Capitaland Reits) to spearhead the REIT rally. In this article, we include the Frasers and Keppel group of REITS to expand to MACFK.
Our prediction has played out almost perfectly with SREITS up another 7.855%, from the 10.088% up in 1Q2019 to notch a total of 17.943% capital gains so far. Including the average dividend yield of 5.9%, total gains would have worked out to 20.893% so far for half-year 2019!
Our predictions have been a beacon of light in contrast to many market participants who have predicted at end-2018 and even in April 2019 to take profits on SREITS as yields and P/NAV have reached beyond -1SD and 1.5SD respectively and yield spreads have fallen way below the 5-year historical average.
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 REITs Tactical Switches and Recommendation process.
The Top Performing REIT in 1H2019 goes to Lippomalls which saw its DPU plunged from 0.9 cents in 1Q2018 to just 0.59 cents in its 3Q2018 results. This was when we sensed a turnaround situation as the share price fell below 19 cents and informed our student investors in our classes and symposiums. We had highlighted that negative implications on Lippomall’s sponsor, Lippo Karawaci resulting from a credit downgrade was overdone and presented a great risk-return buying chance when the yield went close to 11%.
Notably, 9 out of the 10 Top Performing REITS for 1H2019 came from the MACFK group, our most preferred REITS which we have always recommended in our classes.
Also, all Top 10 Performing REITS scored capital gains of more than 20% in 1H2019, a feat that was last seen in 1H2013 before the “Taper Tandrums” correction.
The Worst Performing REIT in 1H2019 goes to newly listed Eagle Hospitality Trust. We had warned in our investment’s classes and symposiums that this REIT will fail at IPO as the huge uncertainty surrounding its Queen Mary’s assets and potential contingent liability would drag down its share price. Also, it was not well advised of Eagle to time its IPO barely 1 month of its competitor ARA Hospitality Trust. Not surprisingly, its rapid 10% fall from its reduced IPO price of US$0.78 (previously was US$0.88) in less than a week was unprecedented for SREITS listing since 2014.
Interestingly, the 10 Worst Performing REITS for 1H2019 may have presented REIT investors looking for laggards. These include notable names like ESR REIT and First REIT which have held Investors Meet and Symposiums with us recently. SPH REIT and Suntec REIT are also notable laggards.
2018 and 1H2019 REITS performance clearly underscored what we have been teaching for the past decade.
Upcoming Interest Rate cuts and current Demand-Supply Dynamics are supportive of SREITS valuations
Heading into 2H2019, sceptics have again expressed switching out of SREITS as they had just enjoyed one of the best-ever half-year since SREITS started in Singapore in 2002. We think that the upcoming 2-3 interest rate cuts would be supportive of SREIT valuations.
This would translate into cost savings for many SREITS as I would not be surprised if most of the SREITS would let their interest rate hedges lapse when they come up for renewals in 2H2019.
A lower risk-free rate and lower interest rates will lead to lower cost of capital which would mean that any price correction is likely to be shallow as SREIT valuations would be supported.
But I have to warn that SREIT valuations have almost reached the May 2013 “Taper Tandrums” levels in terms of -2SD for dividend yields, +1.5SD for Price/BV and Yield Spread relative to the Singapore 10-year bond yield.
Going forward, the lynchpin for outperformance would lie in acquisitions. REITs that make DPU and Yield accretive acquisitions should be on investors radar as yet another REIT, US Prime REIT enters the market. This is an 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.
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.
GCP Global recent videos with > 2,000 FB Reached, Engagements and Views –
How to grow your REITS portfolio consistently and steadily to $36 million
https://www.facebook.com/352565835119256/posts/806814769694358/
Romancing Retail REITS to Profitable Heights
https://www.facebook.com/352565835119256/posts/785049668537535/
Why REITS appeal to Malaysia’s Top Surgeons and Medical Specialists 2019
https://www.facebook.com/352565835119256/posts/805953419780493/
Investors Trip to Hangzhou for GCP Global investor students
https://www.facebook.com/gabrielyap17/videos/1149532861866643/
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