Investment Fundamentals Forum 23 April Real Estate Investment Trust (REITs)

Transcription

1 Investment Fundamentals Forum 23 April 2013 Real Estate Investment Trust (REITs) Chua I-Min, CFA

2 Chua I-Min, CFA Instructor and Speaker for AB Maximus in Shares and REITs Investments Create a Secondary Income Stream through long term share investing Investment in REITs A guide to Property Stocks Provide Real Estate Investment Consultancy and Training

3 PhillipCapital Investment Experience 1. NishiAzabu Isle (Minato-ku) 2. L Elysee (Shibuya-ku) Asset Under Mgt: SGD 100 Mil (approx) 3. La Piazza (Setagaya-ku) 4. Maison De Ville (Minato-ku)

4 Investment Experience Capitaland China Holdings (based in China) Total land investment: SGD 200 Mil (approx)

5 Disclaimer and Declaration The full content of the program is for educational purposes only and should not be used as investment recommendations. SGX Academy and its trainers are not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss. Examples of specific shares may be citied for illustration purposes and the trainer may have personal interest in the particular shares.

6 What you will learn today: 1 Understanding the Property Sectors 2 Property Level Details to Take Note 3 Quick Valuation Method 4 How to Pick a REIT

7 Investment Strategy Is a dividend play instrument (regular income stream) Not for Capital Gain! In another words, is more for long term investment

8 Understanding the Property Sectors

9 Offices 1. CapitaCommercial Trust 2. Frasers Commercial Trust* 3. Keppel REIT* 4. Mapletree Commercial Trust 5. Mapletree Greater China Commercial Trust* 6. Suntec Real Estate Investment Trust * With Overseas Properties

10 Retail Malls 1. CapitaRetail China Trust* 2. CapitaMall Trust 3. Fortune Real Estate Investment Trust * 4. Frasers Centrepoint Trusts 5. Lippo Mall Indonesia Retail Trust* 6. Starhill Global REIT* * With Overseas Properties

11 Industrial / Logistic 1. AIMS AMP CAP Industrial Trust* 2. Ascendas Real Estate Investment Trust 3. Cache Logistics Trust 4. Cambridge Industrial Trust 5. Mapletree Industrial Trust 6. Mapletree Logistics Trust* 7. Sabana Real Estate Investment Trust * With Overseas Properties

12 Hospitality / Healthcare / Residential 1. Ascott Residence Trust* 2. First Real Estate Investment Trust* 3. Parkway Life REIT 4. Saizen REIT* * With Overseas Properties

13 Any growth potential? Is the rental sustainable?

14 Rental Growth / Sustainability Office Industrial / Logistic Residential Dependant on Demand and Supply Retail Malls Healthcare Hospitality

15 Is there Potential for Rental Growth for Singapore Office Buildings? Marina Bay a centrepiece of efforts to ensure there is sufficient office space to meet future needs will be a seamless extension of the current Central Business District at Raffles Place. At 85 hectares, the new growth area will be more than twice the size of Raffles Place, which now spans 31 hectares. Source: Channelnewsasia, 28 Feb 2008 Enough Supply? Over Supply? Opportunities for Rental Growth?

16 Is there Potential for Rental Growth for Singapore Office Buildings? DBS to move 35% of Singapore staff into new Changi complex by Source: Channelnewsasia, 25 Feb 2009 Trend among Companies? Good for Industrial Properties?

17 '000 sqf Looking at Numbers 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Singapore Future Office Space Supply 3,993 2,788 2,497 1, F 2013F 2014F 2015F 2016F >2016 Impact on Rental Growth? Source: URA

18 Looking at Numbers Source: Company Presentation

19 Property Level Details to Take Note

20 Take a Look at the Properties! Singapore 1. Suntec City 2. Park Mall 3. One Raffles Quay 4. Marina Bay Financial Centre Properties

21 Take a Look at the Properties! Singapore Market Street 2. China Square Central 3. Alexandra TechnoPark Australia 4. Caroline Chisholm Centre, Canberra 5. Central Park, Perth

22 Property Land Tenure Lettable Area (sqm) Title (Leasehold) JCube 19,517 Until 2090 Lot One 20,395 Until 2092 Plaza Singapura 46,296 Freehold Raffles City (40%) 74,535 Until 2078 Rivervale 7,540 Until 2096 Sembawang 12,193 Until 2884 Tampines 30,584 Until 2091 Development (30%) 26,766 Until 2110 Investment (CRCT) Total 508,896 Source: Annual Report

23 Property Land Tenure Lettable Area (sqm) Title (Leasehold) Anzhen 43,443 Until 2034 Xizhimen 83,075 Until 2044 Wangjing 68,010 Until 2043 Erqi 92,356 Until 2042 Shuangjing 49,463 Until 2042 Minzhongleyuan 38,631 Until 2044 Qibao 72,729 Until 2043 Saihan 41,938 Until 2041 Wuhu 45,634 Until 2044 Total 535,279 Source: Annual Report

24 Property Land Tenure Lettable Area (sqm) Title (Leasehold) Medan Fair 56,109 Until 2027 Kramat Jati Indah 32,540 Until 2031 Tamini Square 17,475 Until 2025 Palembang Square 31,448 Until 2039 Palembang Sqr ext 17,326 Until 2041 Pejaten Village 41,847 Until 2027 Binjai Supermall 23,022 Until 2016 Matahari Units (7) 94, Total 710,316 Source: Annual Report

25 Occupancy REIT Occupancy CapitaRetail China 97.5% CapitaMall 98.4% Fortune 96.5% Frasers Centrepoint 93.6% Lippo Malls 92.7% Starhill Global 99.4% Source: Company Presentations

26 Lease Expiry REIT Offices Retail Malls Industrial Health Care Weighted Average Lease Expiry 2.7 years to 5.9 years 2.0 years to 5.3 years 2.2 years to 5.5 years 9.0 to 11.3 years Source: Company Presentations

27 Credit Risk REIT Capita Commercial Frasers Commercial Keppel REIT Mapletree Commercial Suntec REIT Current Ratio Liabilities/ Asset EBIT / Interest Loan Maturing vs Total Cash % 3.7x 3% % 2.0x 0% % 5.3x 6% % 5.6x 0% % 5.7x 24% 3.41 Source: Company Financial Results

28 Quick Valuation Method

29 Dividend Yield Find the fair dividend yield with historical data Fair Dividend Yield = Annual Dividend Average Price for the Year What is the yield that the market has been asking for over the years? Project future dividend Take into consideration event that affects the dividends

30 Dividend Yield Fair Value = future dividend / fair dividend yield Dividend Price Price = = Dividend Yield Future Dividend Fair Dividend Yield Principle At what price should one pay in order to get the fair dividend yield?

31 Dividend Yield REIT Average DPU $ $ $ Keppel REIT Avg Price $1.20 $1.23 $1.06 Div Yield 5.31% 5.76% 7.33% 6.13% DPU Source: Annual Report Price Source: finance.yahoo.com

32 Dividend Yield REIT Average Capita Commercial Frasers Commercial* Keppel REIT DPU $ $ $ Avg Price^ $1.28 $1.31 $1.34 Div Yield 6.12% 5.74% 6.01% 5.96% DPU $ $ $ Avg Price $0.759 $0.808 $1.01 Div Yield 7.38% 7.12% 6.62% 7.04% DPU $ $ $ Avg Price $1.20 $1.23 $1.06 Div Yield 5.31% 5.76% 7.33% 6.13% DPU Source: Annual Report Price Source: finance.yahoo.com

33 Dividend Yield REIT Average Mapletree Commercial Suntec REIT DPU $ $ Avg Price $0.857 $0.961 Div Yield 6.15% 6.42% 6.29% DPU $ $ $ Avg Price $1.40 $1.39 $1.38 Div Yield 7.05% 7.15% 6.88% 7.03% DPU Source: Annual Report Price Source: finance.yahoo.com

34 Future Dividend Source: Company Presentation

35 Events Assumed Impact* Implied DPU in Chifley Square Dividend Yield DPU increase by 1.1% in 2014^ $ DPU for 2012 = $ Increase = 1.1% x $ % = $ DPU Fair Dividend Yield Fair Value $ % $1.28 Assume no organic growth ^ requires discounting for changes in 2014

36 How to Pick a REIT

37 Relative to your personal Investment / cost of your funds, Why Invest in REIT? Are the REITs dividends (fair dividend yield) good enough for you?

38 Why Invest in REIT? Is it worthwhile to take the additional risk for the additional returns? Source: CCT 3Q12 Financial Presentation

39 Why Invest in REIT? Significant Market Risk (price fluctuation) How to mitigate? Source: finance.yahoo.com

40 Why Invest in REIT? 1. Buy below Fair Value 2. Be Prepared to hold for Long Term 3. Spread out the Investment Source: finance.yahoo.com

41 Investment Objective Time Horizon Choosing between REITs E.g. Regular income for very long term (20 years) Key Decision Criteria (in order of priority) Property Type Still in Demand after 20 years? Land Title Should at least have another 70 years! Fair Dividend Yield Acceptable? Buy below Fair Value! What are some of the REITs that fall into this category?

42 Investment Objective Time Horizon Choosing between REITs E.g. Highest Possible Return Key Decision Criteria (in order of priority) Dividend Yield Buy below Fair Value Risk Management (Events to take note)! Occupancy Credit Risk Title Expiry

43 Choosing between REITs REIT (based on stock price on 11 Apr) Dividend Yield Sabana REIT 7.03% Saizen REIT 6.29% AIMS AMP CAP Industrial Trust 6.23% Ascott Residence Trust 6.19% Cache Logistics Trust 6.15% Mapletree Industrial Trust 6.08% Cambridge Industrial Trust 5.91% Lippo-Mall Indonesia Retail Trust 5.67% Disclaimer: Based on 2012 dividend payout which may not continue going forward. Invest at your own risk! * Using projected dividend provided at IPO Data Source: SGX

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