Real Estate Research and Products Team - May 2017 - Investor-One
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Real Estate Research and Products Team May 2017 Singapore Exchange
Key Takeaways of the Real Estate Sector
1. Interest rate hike cycle
− Consensus expects 3 rate hike from Federal Reserve in 2017. A potential headwind for REITs and physical Real Estate
demand?
2. Residential property prices stabilising, and home affordability lowest amongst peers
− Private residential market saw 14 consecutive quarters of price decline (post government measures), the longest since
2004. 1Q17 data showed flattish non-landed segment prices. March primary private home sales (1,780 units) the highest
level in four years.
− Singapore’s property household affordability at 4.8x* (4.4x incl. HDB), lowest amongst key gateway cities average of >10x.
3. Commercial, Industrial and Hospitality segments still weak
− Commercial and Industrial segments continue to face headwinds but supply peaking in 2017. Demand/supply dynamic to
likely normalize from 2018 onwards.
− In the Hospitality segment, Singapore’s hotel RevPar declined 4.6% y-o-y on elevated supply and larger proportion of
budget tourists, despite +7.7% y-o-y visitor arrivals in 2016.
4. Property developers valuations lower than historical mean
− Singapore property developers currently trading (current PB of 0.76x) below historical mean PB of 0.83x and close to the -1
standard deviation
5. Largest cluster of SREITs in Asia (ex Japan)
− SGX’s SREITs cluster is largest in Asia (ex Japan) with consistently higher dividend yields of 6.4%. SREITs have an average
gearing of 33%, offering stable exposure into foreign assets (more than 75% owning offshore assets).
Source: Demographia
2
Longer-term Residential Property Cycle in Singapore
Singapore Private Residential Market (1990-2017)
11% decline
180.0 63% rally in
Singapore property post cooling
property prices. measures
market on upward cycle
160.0 10 quarters Peak in 2Q13
and peaked in 2Q96.
Cooling measures of decline Period of low
140.0 1Q 2017 at 136.7
implemented in May '96 interest rates (-0.4% qoq)
Cooling measures
ABSD in 4Q11.
120.0 Influx of ↑ABSD in 1Q13.
Dot-com foreign TDSR in 2Q13.
100.0 bubble buyers
80.0 Global
SARS Financial
Crisis 14 quarters
60.0 Asian outbreak
of decline
Financial
40.0 Rapid economic Crisis
growth, increased 15 quarters 4 quarters
demand for housing, of decline of decline
20.0 and allowance to use
CPF for loans in 1993
0.0
Singapore Private Residential Property Price Index (1Q09 = 100)
Source: URA
3
Current state of the Real Estate Sector
Current valuations below historical average Interest rate hike cycle a potential headwind
• SG property developers (current PB of 0.76x) trading below • Expectations of interest rate hike (3 rate hikes in 2017) priced in SREIT
historical average PB of 0.83x and close to the -1 standard deviation valuations. Yield spreads between SREITs and 10 year government bond
is at 433bps, 93bps above long term average of 340bps
• Valuation gap between SREITs and property developers are • Rising rates will not substantially impact developers’ land bidding prices.
narrowing; property developers have outperformed in the last one However, sharp rise in mortgage rates may impact demand.
year • MAS maintained S$NEER policy band at 0%, maintaining a “neutral
policy stance” – suggesting a “dovish” guidance (avg. SREITs gearing at
33%)
1.2 Yield spread at 433bps vs long term average of 340bps
Historical PB of FTSE ST Real Estate Holdings and Development 7
Index
1
5
0.8
3
0.6
1
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
0.4
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
FTSE ST Real Estate Investment Trust Index Yield SG 10y Government Bond Yield
PB Avg PB PB +1 sd PB -1 sd Yield spread Long term average yield spread
4.0% 3M SIBOR vs 3M SOR rates
0.4 Valuation gap between Developers and REITs are narrowing
3.5%
0.2 3.0%
2.5%
0 2.0%
1.5%
-0.2 1.0%
0.5%
-0.4 0.0%
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
PB gap between developers and REITs
3M Singapore Interbank Offered Rate (SIBOR) 3M Swap Offer Rate (SOR)
Source: URA, Bloomberg (Apr 2017)
4
SGX’s Real Estate Sector
All SGX Listed Companies
Companies in this sector engage in real estate development, management & operation, and
Real Estate Sector
also include real estate investment trusts (REITs). Drivers for this sector as overseas assets
may be domestic in nature and differ geographically.
13%
SGXs Real Estate sector is made up of 100 companies with combined market cap of over
S$183 billion.
MSCI Asia Pacific ex Japan Index
There are 57 real estate developers, managers and operators listed on SGX valued at over Real Estate Sector
S$105 billion. 87%
8%
Singapore is the largest REIT market in Asia ex Japan with 43 REITs & Property Trusts valued
at over $78 billion listed on SGX and is one of the fastest growing markets in the world.
92%
Note: Market share is defined by number of companies.
1600 SGX Real Estate Developers & Operators have outperformed in the last 1 year
1400
1200
1000
800
600
SGX SREIT Index SGX Real Estate Developers & Operators Index
Source: Bloomberg (Apr 2017)
5
Singapore’s Real Estate – A matured & stable sector
Singapore has one of strongest growth in Singapore is the largest REIT market in
real estate among the world Asia ex Japan
• Singapore ranked 5th most powerful and important • Singapore’s REIT sector is one of the
property market globally for 2016 fastest growing in the world
• Singapore recorded the 6th highest residential
capital growth globally at 105% in the last 10 years
SGX's Real Estate sector has grown 5 times
200 187.5
150 3x more companies
5x larger by market cap 105
100
50 33 37.8
0
1997 2017
No. of companies Combined mkt cap S$B
Source: Savills, Bloomberg (Apr 2017)
6
Diversity of Property Developers & REITs across different
property assets
Landlords • Developers • REITs
Hospitality Industrial Office/ Retail Residential
Commercial
Developers Developers Developers Developers Developers
Develops and operates Develops and operates Develops and operates Develops and operates Develops and operates
hospitality assets industrial buildings, office buildings retail malls residential properties
including hotels and warehouses, bizhubs
serviced apartments Examples: Guocoland, Examples: CapitaLand, Examples: Bukit
Examples: Sinarmas, Ho Bee Land, UOL UIC, Wheelock Prop Sembawang, Oxley,
Examples: OUE, City LHN, Oxley City Dev
Dev, Far East Orchard
Hospitality REITs Industrial REITS Office REITS Retail REITS
Hold hospitality-related Hold properties used Hold office properties Hold properties meant
properties such as for manufacturing or for retail activities such
hotels and serviced logistics such as Third largest REIT sub- as shopping centres
apartments factories and segment and malls
warehouses
Smallest REIT sub- More volatile and Largest REIT sub-
segment Second largest REIT susceptible to changes segment
sub-segment in business conditions.
In terms of client type, Recent trends include
independent leisure Clients may be single Anchor tenants leases increasing
travelers have higher tenant (longer leases) are important concentration of F&B
room yields than or multi-tenanted outlets and increased
corporates (shorter leases). Sensitive to changes in foot traffic in suburban
Typically shorter leases business conditions malls
Cyclical and sensitive to
global economic Stable yield and longer Resilient yield and very
conditions tenure lease visible assets
7
SGX 100 Real Estate & REITs Companies
57 Real Estate Developers, Managers & Operators
Hong Kong/China Japan Singapore
• HongKong Land • Tosei Corporation • CapitaLand Limited • Perennial Real Estate • Tuan Sing Holdings • 3Cnergy Limited
• Yanlord Land • City Developments • Wing Tai Holdings • SingHaiyi Group • Top Global
• First Sponsor Group ASEAN • UOL Group • Bukit Sembawang • Hiap Hoe Limited • IPC Corp
• Bund Center Investment
• Sinarmas Land • Frasers Centrepoint • Fragrance Group • MYP Limited • Starland Holdings
• Ying Li Int’l
• CWG Int’l • Yoma Strategic • United Industrial • GSH Corp • Hwa Hong Corp • Singapore eDevelopment
• Weiye Holdings • UOA Corp • Far East Orchard • Sing Holdings • Imperium Crown
• Cedar Strategic • Astaka • Wheelock Properties • Roxy-Pacific • Heeton Holdings • Pollux Properties
• Pan Hong Holdings • Pacific Star • GuocoLand Holdings • Goodland Group • Amplefield Limited
• China Yuanbang • Hatten Land
• Oxley Holdings • Hong Fok Corp • Tee Land Limited
• Debao Property Global • Ho Bee Land • Aspial Corp • LHN Limited
• LCT Holdings
• Lafe Corporation • Global Logistic
Properties
43 Real Estate Investment Trust (REITs) & Property Trusts
REITs (32) Property Trusts (5) Stapled Trusts (6)
Industrial & Office • Sabana REIT Retail Specialty Property Trusts Stapled Trusts
• Ascendas REIT • AIMS AMP Capital Ind REIT • Mapletree GCC Trust • Parkway • RHT Health Trust • CDL Hospitality Trusts
• CapitaLand Comm. Trust • Soilbuild Business Space • CapitaLand Mall Trust Life REIT • Ascendas India • Far East Hospitality Trust
• Suntec REIT REIT • Fortune REIT • First REIT Trust • Ascendas Hospitality
• Keppel REIT • Viva Ind Trust • Frasers Centrepoint Trust • Croesus Retail Trust
• Mapletree Log Trust • OUE Comm. REIT • Starhill Global REIT Diversified Trust • OUE Hospitality Trust
• Mapletree Ind Trust • IREIT Global • CapitaLand Retail China • Mapletree • Dasin Retail Trust • Viva Industrial Trust
• Cache Logistics Trust • Manulife US REIT Trust Comm. • Frasers Hospitality Trust
• Frasers L&I Trust • Lippo Malls Indo Retail REIT Trust
• Frasers Comm. Trust
• Cambridge Ind Trust • EC World REIT • SPH REIT
8
A look at some sector leaders on SGX
Mcap: S$16.0B
Largest Singapore-listed
property developer
Mcap: S$9.8B
Owner of one of world’s
largest hotel groups
Mcap: S$1.5B
One of pioneers in residential
property development
Mcap: S$7.4B
Singapore’s first & largest listed
business space & industrial REIT
Mcap: S$1.4B
First data centre REIT listed in Asia
Source: Company websites
9
SGX’s 43 SREITs & Property Trusts largest in Asia (ex Japan)
Established and largest Asian REIT Offers investors stable
market (ex Japan) exposure into foreign assets
More than 75% SREITs & Property Trusts
own offshore assets across Asia Pac,
Singapore has 43 REITs & Property Trusts with a Singapore Hong Kong Australia Japan South Asia, America & Europe
total market capitalisation of over S$78 billion Market Cap S$78B S$42B S$144B S$146B
and average dividend yield of 6.4%, providing
liquidity to largest REIT Market in Asia (ex Japan). Avg Div Yield 6.4% 6.2% 5.4% 4.4%
Overseas
Singapore
10
16
Avg P/B* 0.96 0.81 1.26 1.42
The sector has experienced high growth with a
market capitalisation CAGR of nearly 30% over No. of REITs 43 11 48 60
the last 8 years. Singapore
&
Overseas
17
7.0 6.4 6.2 Avg Div Yld (%)
SREITs consistently pay 5.4 Tax incentive for investors
5.0 4.4
one of highest dividend
Individual investors
yields in the world 3.0 - Tax exemption on dividends for both
8 S-REITs HK-REITs AU-REITs J-REITs local and foreign investors
6 5.9 Institutional investors
4.6 - Withholding tax for foreign institutional
4 4.0
3.5 unit holders at 10% (reduced from 20%)
2
SREITs distribute higher dividend yields compared to major global REIT indices Average gearing at 33%
0
% Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 S-REITs average gearing at 33%, well below
S REIT Index AU REIT Index J REIT Index US REIT Index the limit of 45%. This may keep financial
expense liabilities in check.
Note: * using weighted market capitalisation average Source: Bloomberg (Apr 2017)
10Key Macro-Economic Drivers for the sector
1. Demand 2. Supply
Population growth Land supply
− Increase in population size increases demand for − Government Land Sales (GLS) affect land supply for
housing property developers to bid for
− Singapore’s population is expected to hit 6.9m by 2030 − GLS has been declining since 2H2012, resulting in land
from the current 5.6m banks of Singapore developers depleting over the years
Increased education, employment and rising Unsold inventory held by developers
affluence − Unsold units have declined since 2011 with about 27% of
− Better educated population, more dual-income unsold units belonging to the high-end segment
married couples result in higher rates of home- Vacancy rates and transactions
ownership as affordability increases
− Home vacancy rates affect transaction prices as; vacancy
− 90.9% of Singaporean families own homes in 2016 vs rates are at a 16 year high with declining home prices
58.8% in 1980; some families also own multiple
properties
Government Cooling Measures
− Cooling measures such as stamp duties, and loan
3. Interest Rates
restrictions help stabilise increasing demand over the
years (SG households are holding an est. S$4B in cash Impact on mortgages
since introduction of property curbs) − Higher interest rates result in higher borrowing costs for
− Major measures in 2011 (SSD and ABSD) and 2013 home owners
(ABSD changes and TDSR) have largely curbed demand
Source: SingStat, URA
11Residential Sub-segment
Core Central Region Rest of Central Region Outside Central Region
Stabilization in prices and (CCR) (RCR) (OCR)
transactions Landed Non-Landed
Segment Drivers
− Demographics
− Affordability/Affluence, Employment rate
Private Residential new launches & primary
− Government measures/policies 4,000 sales
3,000
− Inventory/new launches, vacancy rate
2,000
− Interest rates
1,000
Segment Snapshot
-
− Household affordability lower than peers. Singapore household
May-11
Jan-12
May-12
May-13
Jan-14
May-14
May-15
Jan-16
May-16
Jan-11
Mar-11
Nov-11
Mar-12
Nov-12
Jan-13
Mar-13
Nov-13
Mar-14
Nov-14
Jan-15
Mar-15
Nov-15
Mar-16
Nov-16
Jan-17
Mar-17
Jul-11
Sep-11
Jul-12
Sep-12
Jul-13
Sep-13
Jul-14
Sep-14
Jul-15
Sep-15
Jul-16
Sep-16
affordability (private property) at only 4.8x (or 4.4x incl. HDB), lowest
amongst key gateway cities such as Hong Kong (18x), London, San
Francisco, Tokyo and Sydney (at least 10x) - Demographia New Launches Unit sales (primary)
− Growing local workforce and peaking supply. Government aims to grow
local workforce by c.25-40k (or 1%) annually for next few years (vs. 2021
+20% y-o-y vs. 7,900 in 2016 – JLL.
Source: URA, JLL, Demographia, Singstat CCR RCR OCR
12Industrial Sub-segment Warehouses/
Business Parks Hi Tech Hubs
Factories
Still on a decline but look out for
green shoots 2500 Industrial space supply to taper off after 2017
Segment Drivers 2000
− Industrial parks rental rates 1500
Warehouse space '000 sq m gross
− Increased manufacturing output, higher GDP growth rates 1000 Factory space '000 sq m gross
− Government shift towards various business, higher demand for 500
related biz parks
− Supply of land available for industrial parks development 0
2017 2018 2019 2020 2021
Segment Snapshot
− Industrial parks supply consolidating in 2017. Supply for Vacancy rates expected to reach 11% in 2017. Rental rates continue
industrial sector to peak in 2017 and reduce in the next few on a downward trend Vacancy rates to
years. 47,000 reach 11% in 2017
110
− Decline rental and low take-up rates. Rental rates expected to
decline by 5-10% per annum in next few years, weighted down 45,000 105
by oversupply and low take-up rates (unoccupied factory space
doubled from a year back). Vacancy rates expected to increase 43,000 100
to 11% in 2017.
− Focus on higher value-add businesses. Government plans for 41,000 95
Singapore’s economic shift will increase demand for more hi-
tech factories and business parks. 39,000 90
Vacant (‘000 sq m)
− Green shoots from manufacturing sector. Economic
Development Board expects Singapore’s manufacturing output 37,000 Occupied (‘000 sq m) 85
forecast for 2Q17 to increase 16%, which could potentially Rental Index
increase demand for business parks. 35,000 80
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017
Source: URA, Singstat, JTC
13Office/Commercial Sub-segment 3 classes of office buildings – Grade A B, and C
Central Business
“Headwinds” continue to persist as District (CBD)
City-fringe Sub-urban areas
office rents likely to bottom 300 SG office supply to peak in 2017
Segment Drivers 200
− State of the economy (closely linked to financial industry)
100
− Office rental rates
− Demand for office space and size, vacancy rates 0
2Q-4Q2017 2018 2019 2020 2021 >2021
− Supply of land available for office developments Office Space '000 sq m gross
200 Central region office space falling property prices and 145
Segment Snapshot 190
rentals since 2015 140
− Office supply expected to peak in 2017. New office supply will peak 135
180
in 2017 largely due to Marina One, Guoco, DUO, and shortage of 130
supply to be expected in the next 2 years. 170
125
− Rental rates to bottom in 2017. Office rents in CBD have been on a 160 120
steady decline since 2015 (9 quarters of decline) with higher
vacancy rates of 12%. Grade A office rents are expected to hit a 150 115
2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q
trough of $8.50psf/mth (7% lower than current of $9.10psf/mth). 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016
− Decentralisation and smaller physical footprint. Many middle and Rental Index Price Index (RHS)
back offices have decentralised to sub-urban areas with lower 12
rental rates. Reduction of physical footprint by adopting smaller 11 Office space vacancy rates at current high of 12%
desks and open concepts (e.g. MUFG). 10
− Sale of Grade A building still strong. Office investments made up 9
63% of total investment sales of $4.1 billion in 1Q2017, higher than
8
previous 2 quarters. (Sale of Asia Sq Tower 1 to Qatar Investment
Authority, BlackRock and CapitaLand exploring sale of Tower 2) 7
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Source: URA, Singstat, JTC 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017
14Retail / Hospitality Sub-segment
A Challenging year for retail and Hotel RevPar -4.6% despite +7.7% tourist arrivals
hospitality 20%
Segment Drivers 15%
10%
− Shopper traffic 5%
0% -5%
− Retail rental
− Tourist arrivals -10% -15%
May-11
May-12
May-13
May-14
Jan-15
May-15
May-16
Jan-11
Jan-12
Jan-13
Jan-14
Jan-16
Jan-17
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
− Government land sales
− Supply of retail space
Tourist arrival y-o-y Hotel RevPar y-o-y
Segment Snapshot
− Structural challenges in Retail sector as E-Commerce disrupts. Retail supply by expected year of completion
Vacancy rate for Singapore Retail at 7.7% in 1Q17 despite a 2.9% q-o- 2.5
q decline in rental. New Retail space expected to peak in 2018 at
258,000 gross sqm. 2
In million sq. feet
− Decentralization into suburban Retail malls. Government’s plan of 1.5
decentralized business districts has seen growing development in
suburban area. Most of upcoming Retail supply coming from Outside 1
Central Region in 2018.
0.5
− Elevated hotel supply and mix-shift in tourist profile. Singapore’s
hotel RevPar declined 4.6% y-o-y in 2016 (despite +7.7% y-o-y in 0
visitor arrival) likely due to elevated supply and higher mix of budget 2017 2018 Beyond 2019
tourists (hotel occupancy rates average at 86%). Supply expected to Downtown Core Fringe Area Rest of Central Region
increase 5.9% in 2017. Orchard Outside Central Region
Source: URA, Singstat, STB
15Valuations of the Real Estate Sector
Trailing PB (x) ROE (%)
1.2x 7.6
1.00 8.0x
0.96 7.0x 6.3
1.0x 0.85 5.9
0.70 6.0x
0.8x 4.4
5.0x
0.6x 4.0x
0.4x 3.0x
2.0x
0.2x 1.0x
0.0x 0.0x
Property Property SREIT Median SREIT Average* Property Property SREIT Median SREIT Average*
Developer Developer Developer Developer
Median Average* Median Average*
Gearing Ratio (%) Dividend Yield (%)
50.0 7.0 6.6 6.4
43.3
6.0
40.0 33.8 33.6 33.6
5.0
30.0 4.0
20.0 3.0 2.1 2.3
2.0
10.0
1.0
0.0 0.0
Property Property SREIT Median SREIT Average* Property Property SREIT Median SREIT Average
Developer Developer Developer Developer
Median Average* Median Average
Note: * using weighted market capitalisation average Source: Bloomberg (Apr 2017)
Gearing Ratio refers to Net Debt to Equity for property developers and Debt/Asset ratio for SREITs
16Commonly used valuation methodologies for the sector
RNAV/NAV Calculation Dividend Discount Model
Revalued Net Asset Value (RNAV) and Net This valuation method (DDM) can value a
Asset Value (NAV) mostly used as a stock based on the absolute amount of
valuation method for Developers dividends it distributes to shareholders in
RNAV/NAV can be derived by employing a perpetuity
discounted cash flow (DCF) model on To incorporate dividends growth, the
properties under development. Investment Gordon Growth Model can be used.
properties’ NAV can be calculated using an As Singapore REITs are required to pay out
income capitalisation method the majority of earnings to unit holders, the
Premium or discount to RNAV/NAV are DDM is an appropriate valuation method
driven by factors such as property prices, Many investment analysts use a
transaction volumes and execution combination of RNAV/NAV and DDM
valuations to value REITs
Price-to-book (P/B) Discounted Cash Flows
P/B derived by dividing stock price by book
(DCF)
value per share Present value of an investment (adjusted
Shows an investor how much a stock is for time value of money). Sum of value of
worth relative to book value each period’s free cash flow to the firm,
Most S-REITs trade at or slightly above their discounted back to present
respective book values while Singapore Analysts typically use 10-year DCF models
developers trade at a discount to their with a terminal growth rate assumption as
respective book values a sanity check on valuation (P/E and P/B)
17Case studies
18Case Study: UOL Group Limited (U14)
One of Singapore’s leading listed developer with a track record of over 50 years
Diversified Extensive portfolio of development and investment properties, hotels and serviced suites providing diversified earnings
Portfolio Strong balance sheet with debt to equity ratio below 0.4x for the past few years
Investment properties (hotels, retail, office) represent ≥50% of UOL share price performance
revenue and profits, allowing for recurring rental income $8.0
$7.0
Lean land bank and focused property development strategy in
In S$
$6.0
Singapore allows strong sales of most of the under development or
completed projects $5.0
$4.0
Overseas development projects (e.g. China and U.K.) to allow
Apr-11
Dec-12
May-13
Mar-14
Aug-14
Apr-16
Oct-13
Jun-15
Jan-15
Nov-15
Sep-11
Feb-12
Jul-12
Sep-16
Feb-17
diversification from Singapore market
Investment properties the bulk of profits
Debt/equity & Asset Turnover ratio
100% In US$m
Operating profit (%)
80% 0.40 0.130
60% 0.30 0.125
40% 0.120
0.20
20% 0.115
0% 0.10 0.110
FY12 FY13 FY14 FY15 FY16 - 0.105
Property Development Property Investments Hotel Operations FY12 FY13 FY14 FY15 FY16
Management Services Investments
Debt/Equity Asset turnover (RHS)
Source: Bloomberg (Apr 2017), Company website
19Case Study: Bukit Sembawang (B61)
Leading pure-play Singapore developer which was one of the pioneer companies listed on SGX in 1968
Pure Singapore Strong expertise at developing Singapore residential project with a strong landbank
Developer Consistently payer of dividends to shareholders (payout ratio > 90% in the last two years)
Bukit Sembawang share price performance
Holds a valuable landbank of >3m sq feet (mostly freehold/999-year) with
c.80% located in the northern part of Singapore
$7.0
Strong balance sheet with no debt. Net cash of S$383.3m (end Dec ’16), $6.0
In S$
representing c.25% of market capitalisation $5.0
$4.0
Strong positive free cashflow generation (7 consecutive years), allowing $3.0
consistent dividends payouts to shareholders (> 90% in the last two years)
4/27/2011
9/27/2011
2/27/2012
7/27/2012
5/27/2013
3/27/2014
8/27/2014
1/27/2015
6/27/2015
4/27/2016
9/27/2016
2/27/2017
12/27/2012
10/27/2013
11/27/2015
Trading at 1.2x P/NAV with undeveloped land parcels prices not marked to
market. Future catalysts will come from new development projects
Significant portion of undeveloped landbank
Increasing cash and payout ratio
Developed
landbank 400 100.0%
25%
300 85.0%
In S$M
70.0%
200
55.0%
Undeveloped 100 40.0%
landbank
0 25.0%
75%
FY12 FY13 FY14 FY15 FY16
Net cash Dividend payout ratio (RHS)
Source: Bloomberg (Apr 2017), Company website
20Case Study: Ascendas REIT (A17U)
Largest listed Industrial REIT, second largest listed SREIT, and sponsors are Ascendas-Singbridge and JTC
Largest Industrial Offers exposure to biz space parks and hi-specs factories, inline with Singapore government’s push for high value-add businesses
REIT Consistent dividend yield of 5-6%, current dividend yield at 6.1%
Strong balance sheet with lower gearing ratio of 33.8% at end 1QFY17 vs Ascendas REIT share price performance
37.3% a year ago. Well spread debt maturity profile with average debt
maturity of 3.3 years, longest debt matures in 2029. AREIT has a A3 $3.0
credit rating by Moody’s.
$2.5
In S$
Strong customer base as top 10 customers around for about 20.8% of
portfolio gross rental income, with tenants such as Singtel, DSO National $2.0
Lab, Citibank, DBS, Wesfarmers Group
$1.5
Aug-14
Apr-11
May-13
Apr-16
Dec-12
Mar-14
Sep-11
Oct-13
Jun-15
Jan-15
Nov-15
Feb-12
Jul-12
Sep-16
Feb-17
Scaled up Australian portfolio with its first business park acquisition in
Sydney, Australia. Singapore accounts for 86% and Australia accounts for
14% of AREIT’s portfolio by asset value.
2.5 Current PB of 1.25x in line with historical average of 1.30x
600.0 100
500.0 2
80
400.0
60 1.5
300.0
40 1
200.0
100.0 20
0.5
Jun-03
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Mar-04
Jun-06
Mar-07
Jun-09
Mar-10
Jun-12
Mar-13
Jun-15
Mar-16
Sep-05
Sep-08
Sep-11
Sep-14
0.0 0
2013 2014 2015 2016 2017 20178e
Net Property Income (S$M) Profit Margin (%) PB Avg PB PB +1 sd PB -1 sd
Source: Bloomberg (Apr 2017), Company website
21NikkoAM-StraitsTrading Asia Ex Japan REIT ETF
Geographical breakdown
Index yield of ~ 5.7% per annum (per 31 Jan)
Diversified across various REITS sub-industry, as well as geographically
across Asia ex Japan
ETF listed on SGX on 29th March 2017
Counter Name NIKKOAM-STC ASIA_XJ REIT ETF
(stock code) (stock code: CFA)
(Bloomberg) (AXJREIT SP Equity)
REIT Classification
Manager Nikko Asset Management
Expense Ratio Total expense ratio will be 0.6%
Designated Market Makers Flow Traders Asia Pte Ltd and Commerzbank AG
Underlying Reference Asset FTSE EPRA/NAREIT Asia ex Japan REITs Net Total Return
SGD
Net Assets Fund launched 29 March 2017
For more information, please visit https://www.nikkoam.com.sg/etf/asia-ex-japan-reit
22Phillip SGX APAC Dividend Leaders REIT ETF
Yield of ~ 5.1% per annum
Quality REITs in Asia excluding Japan. Tracks dividend-weighted index that
captures over 70% (by total capitalisation) of the REIT universe within the
Asia Pacific ex Japan.
ETF listed on SGX on 20th October 2016
Counter Name PHIL AP DIV REIT US$
(stock code) (stock code: BYI)
PHIL AP DIV REIT S$D
(stock code: BYJ)
Manager Phillip Capital Management (S) Ltd
Expense Ratio Indicative total expense ratio will be approximately 0.65%
Designated Market Makers Flow Traders Asia Pte Ltd and Commerzbank AG
Underlying Reference Asset SGX APAC Ex-Japan Dividend Leaders REIT Index
Net Assets USD 25 million
For more information, please visit http://www.phillipfunds.com/home/etfs
23Summary
> S$180B 43
101 Real Estate & SGX’s 43 REITs and
SREITs with property trusts the
combined market largest in Asia ex
cap of over S$180B Japan
6.4%
SREITs consistently
offer one of highest
dividend yields in
the world
0.76x >5% yield
SG property 2 REIT ETFs offer
developers trading investors diversified
below historical exposure with over
average PB 5% div yield
24Appendix
25SGX Real Estate Indices
SGX Real Estate Indices is made up of 5 indices to measure
1500 SGX Real Estate Indices performance of real estate developers, operators, and REITs listed
on SGX, they are the SGX Real Estate Index, SGX Real Estate 20
1400 Index, SGX Real Estate Developers & Operators Index, SGX S-REIT
Index, SGX S-REIT 20 Index
1300 − SGX Real Estate Developers & Operators Index
− Measures the performance of listed real estate developers
and operators in Singapore
1200
− 16 member companies with a combined market capitalisation
of about S$76 billion
1100
− YTD total return of 20.9%, 1y total return of 25.8%, 3y total
returns of 15.3%
1000 − SGX S-REIT Index
− Measures the performance of REITs in Singapore
900 − 37 member companies with a combined market capitalisation
of about S$73 billion
800 − YTD total return of 11.3%, 1y total return of 12.5%, 3y total
returns of 24.4%
Index inclusion criteria
700
− A company’s business sector must be classified as “Real Estate” or
“Real Estate Operations” or “Residential & Commercial REIT”, as
600 defined by the Thomson Reuters Business Classification (Section
Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 13) in the respective indices
− Index liquidity and free float criteria must be met
SGX SREIT Index SGX Real Estate Developers & Operators Index
Source: Bloomberg (Apr 2017), refer to appendix for full list of index constituents
26Constituents of the SGX Real Estate Developers & Operators Index
Stock Index Market Cap Price SDAV Net D/E Dividend
Name GICS Industry PB (x) ROE (%)
Code Weight (%) (S$Mil) (S$) (S$'000) (%) Yield (%)
Yanlord Land Group Ltd Z25 Real Estate Management & Devel 11.8 3,612 1.865 2,888 0.8 13.0 16.9 2.3
City Developments Ltd * C09 Real Estate Management & Devel 10.6 9,811 10.79 16,247 1.1 7.4 18.0 0.7
Hongkong Land Holdings Ltd * H78 Real Estate Management & Devel 10.4 25,340 10.7701 15,180 0.6 11.2 6.4 2.5
UOL Group Ltd * U14 Real Estate Management & Devel 10.2 5,828 7.24 6,974 0.7 3.6 24.4 2.1
Global Logistic Properties Ltd * MC0 Real Estate Management & Devel 10.1 13,499 2.88 36,345 1.2 7.9 28.5 2.1
Wing Tai Holdings Ltd W05 Real Estate Management & Devel 9.8 1,462 1.89 2,367 0.5 0.2 19.6 1.6
CapitaLand Ltd * C31 Real Estate Management & Devel 9.4 15,969 3.76 33,503 0.9 7.7 41.5 2.7
Yoma Strategic Holdings Ltd Z59 Real Estate Management & Devel 7.5 1,008 0.58 3,342 1.5 3.0 15.2 0.4
Wheelock Properties Singapore Ltd M35 Real Estate Management & Devel 6.1 2,232 1.865 867 0.7 1.9 -15.8 3.2
Ho Bee Land Ltd H13 Real Estate Management & Devel 4.7 1,624 2.44 306 0.6 8.8 43.8 2.5
Perennial Real Estate Holdings Ltd 40S Real Estate Management & Devel 4.2 1,465 0.885 427 0.5 1.3 70.9 0.5
Ying Li International Real Estate Ltd 5DM Real Estate Management & Devel 2.2 358 0.14 1,129 0.4 2.1 81.6 -
Centurion Corp Ltd OU8 Hotels, Restaurants & Leisure 1.3 322 0.435 112 0.8 8.5 132.3 4.6
Rowsley Ltd A50 Professional Services 1.0 402 0.086 738 - -14.9 19.5 -
HLH Group Ltd H27 Food Products 0.5 62 0.01 129 0.5 2.5 -0.3 -
LHN Ltd 41O Real Estate Management & Devel 0.2 79 0.22 115 1.1 24.2 -2.7 2.0
Source: Bloomberg (Apr 2017) * Indicates Straits Times Index (STI) stocks
27Constituents of the SGX S-REIT Index
Stock Index Weight Market Cap SDAV Dividend
Name GICS Industry Price (S$) PB (x) ROE (%) D/A (%)
Code (%) (S$Mil) (S$'000) Yield (%)
Ascendas Real Estate Investment Trust * A17U Equity Real Estate Investment 9.8 7,383 2.56 25,816 1.2 7.4 33.4 1.5
CapitaLand Mall Trust * C38U Equity Real Estate Investment 9.5 6,984 1.97 18,218 1.0 6.9 31.8 5.5
Suntec Real Estate Investment Trust T82U Equity Real Estate Investment 8.4 4,509 1.77 8,730 0.8 4.8 36.4 5.5
CapitaLand Commercial Trust * C61U Equity Real Estate Investment 7.4 4,825 1.625 12,656 0.9 5.1 32.7 5.8
Mapletree Commercial Trust N2IU Equity Real Estate Investment 5.7 4,579 1.595 6,731 1.2 10.3 36.4 5.7
Mapletree Industrial Trust ME8U Equity Real Estate Investment 4.6 3,226 1.79 4,230 1.3 10.8 29.1 6.4
Keppel REIT K71U Equity Real Estate Investment 4.0 3,518 1.06 4,235 0.7 4.9 32.9 5.5
Mapletree Greater China Commercial Trust RW0U Equity Real Estate Investment 4.0 2,991 1.07 4,684 0.8 10.6 39.2 7.0
Mapletree Logistics Trust M44U Equity Real Estate Investment 3.7 2,826 1.13 4,235 1.1 7.2 38.4 6.6
Ascott Residence Trust A68U Equity Real Estate Investment 2.8 2,349 1.095 1,854 0.9 6.1 38.9 7.7
Frasers Centrepoint Trust J69U Equity Real Estate Investment 2.5 1,945 2.11 2,018 1.1 7.1 28.3 5.8
Frasers Logistics & Industrial Trust BUOU Equity Real Estate Investment 2.4 1,444 1.01 3,717 1.1 - 27.8 1.8
Starhill Global REIT P40U Equity Real Estate Investment 2.3 1,680 0.77 1,622 - 8.3 34.8 6.1
CapitaLand Retail China Trust AU8U Equity Real Estate Investment 2.3 1,413 1.59 1,681 1.0 7.6 35.1 5.9
CDL Hospitality Trusts J85 Equity Real Estate Investment 2.2 1,545 1.55 1,975 1.0 3.0 36.6 7.2
Frasers Commercial Trust ND8U Equity Real Estate Investment 2.1 1,075 1.34 1,282 0.9 5.9 35.9 7.5
Parkway Life Real Estate Investment Trus C2PU Equity Real Estate Investment 1.9 1,549 2.56 1,724 1.5 9.0 36.2 5.1
Keppel DC REIT AJBU Equity Real Estate Investment 1.9 1,398 1.24 2,391 1.3 6.4 29.7 4.5
Ascendas India Trust CY6U Real Estate Management & Devel 1.8 1,070 1.15 470 1.4 20.0 28.1 5.1
Lippo Malls Indonesia Retail Trust D5IU Equity Real Estate Investment 1.7 1,200 0.425 1,115 1.1 2.7 31.1 8.2
AIMS AMP Capital Industrial REIT O5RU Equity Real Estate Investment 1.6 891 1.395 554 1.0 1.5 36.0 8.0
OUE Hospitality Trust SK7 Equity Real Estate Investment 1.6 1,296 0.72 988 0.9 1.3 37.8 7.6
Cache Logistics Trust K2LU Equity Real Estate Investment 1.5 780 0.865 1,892 1.1 -3.4 42.8 8.3
Croesus Retail Trust S6NU Real Estate Management & Devel 1.5 751 0.975 1,182 1.0 13.7 45.3 7.4
Frasers Hospitality Trust ACV Equity Real Estate Investment 1.5 1,341 0.73 450 - 4.5 37.5 6.9
Manulife US Real Estate Investment Trust BTOU Equity Real Estate Investment 1.5 738 1.1734 951 1.0 10.0 33.6 4.2
First Real Estate Investment Trust AW9U Equity Real Estate Investment 1.5 1,048 1.35 456 1.3 5.3 30.8 6.3
SPH REIT SK6U Equity Real Estate Investment 1.3 2,515 0.985 1,095 1.1 5.5 25.5 5.7
Cambridge Industrial Trust J91U Equity Real Estate Investment 1.2 763 0.585 854 0.9 0.7 37.3 6.9
Ascendas Hospitality Trust Q1P Equity Real Estate Investment 1.2 877 0.78 636 0.9 17.8 32.7 6.8
RHT Health Trust RF1U Health Care Providers & Servic 1.2 762 0.945 1,102 1.1 19.2 14.8 7.6
Far East Hospitality Trust Q5T Equity Real Estate Investment 1.0 1,088 0.6 683 0.7 1.8 33.1 7.5
Soilbuild Business Space REIT SV3U Equity Real Estate Investment 0.9 695 0.665 938 0.9 0.1 37.0 9.0
Sabana Shari'ah Compliant Industrial Rea M1GU Equity Real Estate Investment 0.9 479 0.455 801 0.6 -10.3 42.8 7.7
Viva Industrial Trust T8B Equity Real Estate Investment 0.4 786 0.815 549 - 5.9 36.8 9.1
IREIT Global UD1U Equity Real Estate Investment 0.2 464 0.745 143 1.2 12.0 41.4 8.5
Saizen REIT T8JU Equity Real Estate Investment 0.0 10 0.035 61 1.1 -10.7 0.0 -
Source: Bloomberg (Apr 2017) * Indicates Straits Times Index (STI) stocks
28Thank you Singapore Exchange Beijing Hong Kong London Mumbai Tokyo sgx.com This presentation is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject SGX to any registration or licensing requirement. This presentation is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This presentation is published for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Further information on this investment product may be obtained from www.sgx.com. Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Examples provided are for illustrative purposes only. While SGX and its affiliates have taken reasonable care to ensure the accuracy and completeness of the information provided, they will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Neither SGX nor any of its affiliates shall be liable for the content of information provided by third parties. SGX and its affiliates may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this presentation is subject to change without notice.
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