04/2019
SREITS has had one of the best performing quarter in 1Q2019 with the 38 SREITS under our coverage up 10.21%. The FTSTI REIT Index closed at 861.44 and ALL of the 38 SREITS under our coverage, posted positive or flat returns in 1Q2019. This is significant as –
1. No single REIT has posted a loss in the current quarter, a feat not seen in the past decade post the Global Financial Crisis!
2. This is the first double-digit return in a quarter not since the preceding quarter before the SREIT market suffered the “Taper Tandrum” on 23rd May 2013 when the then Federal Reserve Chairman Ben Bernanke called for tapering of the QE measures.
This spectacular run vindicated what we have always taught in our REITS Quarterly and REITS Masterclasses for the past 3 decades – Buy when there is unsound noise in the market and go for the MAC – namely Mapletrees, Ascendas and Capitaland group of REITS as the first line of entry.
As in our quarterly REITS class, we have always highlighted that the ability of SREITS to deliver outperformance should not be based on growth in revenue or NPI or Distributable Income, but on the DPU: - (click on the images below for my article written in both 2017 and 2018)
The latest set of quarterly results in 1Q2019 clearly underscored what we have been teaching for the past 3 decades.
5 out of the Top 10 Performing REITS in 1Q2019 came from the MAC. Mapletree Logistics Trust and Mapletree NAC both took the Top 2nd and Top 3rd positions.
Mapletree Logistics Trust, MLT undertook a huge S$1.034 Billion acquisitions last year in China, Singapore and Vietnam.
MAPLETREE LOGISTICS TRUST 2018 ACQUISITIONS
1. Acquisition of 50% of 11 logistics centers in PRC worth RMB1,021.6 million (S$212.8 million)
2. Acquisition of 5 logistics properties in Singapore from CWT worth $778.3 million
3. Acquisition of a warehouse asset in Vietnam leased to Unilever for VND725.1 billion
Analyzing the results of these acquisitions in the latest quarterly results for 1Q2019 clearly showed that these acquisitions, including those Hong Kong acquisitions in 2017 enhanced DPU from 1.937 cents to 2.002 cents throughout the year. Compared to Manulife REIT for instance, MLT did not have to report in “Adjusted DPU” basis to achieve a positive growth in DPU.
MLT did have to resort to 2 private placements to finance the acquisitions –
1. The first placement was done at $1.197 or a 2.25% discount to the then Volume Weighted Average Price (VWAP) of $1.2246 to raise $220 million.
2. The second placement was at $1.21 or a 4.4% discount to the then Volume Weighted Average Price (VWAP) of $1.2651 to raise $367.74 million
We had advised our student investors (which has grown to more than 6,000 now throughout Asia) to “grab” both placements as –
1. Both discounts were less than 5%. At GCP Global, we teach our investor students to watch out and avoid REITS which undertake huge acquisition deals, which can only be financed by subsequent dilutive fundraising exercises like deeply discounted private placements and/or rights issues, which then led to Value Destruction for shareholders. Cases-in-point would be Cromwell REIT and Keppel KBS REIT.
2. The acquisitions are indeed both DPU accretive and Yield accretive. Smart REIT investors should always be wary of REITS that apparently undertake DPU accretive acquisitions, but are in actual fact, non-Yield accretive after taking into account the timing and capital market conditions. Some managers excuse themselves that “capital market conditions have changed” to account for non-Yield acquisitions, but it is an excuse that we at GCP Global frown on. It is a simple rationale – if you are paid millions, you should have the expertise or foresight to engage such expertise on the timing of critical market operations which can have profound dilutive effects for shareholders.
The Worst Performing REIT for 1Q2019 was First REIT.
Investors worries on First REIT center on its problems with its sponsor Lippo Karawaci which was downgraded due to uncertainties relating to the renewal of its upcoming loan in 2Q2019.
This then beg the question if First REIT’s 3 master lease renewals and potentially all its lease renewals with Lippo Karawaci, will be at the same old favorable rates.
We at GCP Global was able to host the First REIT Symposium & Investors Meet at the Marina Mandarin Singapore on Saturday, 9 March 2019.
Key to making an informed decision on the share price, Smart REIT investors should always weigh if the huge 40% fall in its share price from early-2018 has discounted uncertainties posed by the sponsor Lippo Karawaci as well as the change in ownership at the Manager’s level.
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. We have always emphasized that 2 major ways to make good money is –
1. Watching, Investing and Trading the MAC which are always the first to move up or down.
2. Looking out for bomb-out REITS where bad market sentiment and unfounded fears have depressed their share prices substantially while their underlying valuations have taken care of the downside.
The 3 SREITS that we have presented and hosted at our Symposium & Investors Meet 2018 events attended by close to 1,000 investors have done well in 2019.
Some of GCP Global Highlights in 1Q2019 and 2018 –
Can what happened at Hyflux, happen to a REIT? This sad episode which has destroyed many investors’ wealth actually brings out the best in REITS.
https://www.facebook.com/352565835119256/posts/765834133792422/
ESR-REIT surges to historic highs in volumes as share price pierced 51 cents just 9 days after GCP Global Symposium & Investors Meet
Frasers Centrepoint Trust ends 2018 as the 4th Best Performing REIT – GCP Global is privileged to have presented FCT to our investor students in our Symposium & Investor Meet, another of our Winning REIT.
EC World REIT ends 2018 as one of the most Resilient REIT https://www.facebook.com/gabrielyap17/videos/653624365034454/
Investors Trip to Hangzhou for GCP Global investor students
In 2019, we expect to present more winners – do stay tune for our upcoming events.
Do join us for our next upcoming REITS Quarterly class on 11 May 2019 as we thrill and spill the Good, Bad and Ugly REITS.
Also, we seek to highlight if the MAC have indeed run their great course for this round. We will show you what were the similarities compared to the last round before the REITS came up for profit-taking with the current situation.
Do JOIN US NOW for our next quarterly REITs Class on Saturday, 11 May 2019 from 10:00am to 2:00pm. The full link to sign up is: -
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