REIT-TIREMENT - REIT Investing and Personal Finance

A blog about REIT investment and personal finance

Friday, April 19, 2019

Growth Information of REITs

Often for growth profile of REITs, we look at both DPU growth and NAV growth, but are there any other metrics growth that we could look into from Basic Financial Metrics of REITs and Uncommon Financial Metrics of REITs ? Today, let's try to explore this.

1) DPU Growth
REITs could increase its DPU through organic growth or inorganic growth. Organic growth means growth without acquisition of properties, could be through positive rental reversion, increase occupancy, increase REVPAU, AEI (Asset Enhancement Initiative), etc. Inorganic growth is growth either through acquisition or development of properties. Below is list of top 5 REITs that have most DPU growth in past 5 years or since IPO:
Top 5 DPU Growth
Name
Approx. Value
Ascendas India Trust
52%
Fortune REIT
23%
Ascendas Hospitality Trust
19%
Mapletree North Asia Commercial Trust
19%
Mapletree Industrial Trust
17%
* Exclude those less than 2 years since listing.

For more on DPU growth, you could read the below:
1) Probutterfly - REIT Placements and Rights Issue – Yield Accretive vs DPU Accretive
2) The Babylonians - How do REITs grow their business? (Organic Growth)
3) The Babylonians - How do REITs grow their business? (Inorganic Growth)

2) NAV per Unit Growth
Generally, if a REIT is able to have DPU growth, then its NAV per unit would grow as well. However, there are a few exceptional cases where EC World REIT has DPU growth but NAV per unit drop; BHG Retail REIT and Keppel REIT both have DPU decrease over time but NAV per unit slightly increase. I am quite puzzled for this, appreciate if anyone could share their view on this.

Note that it is important to take the NAV value as per the trading currency to account for any foreign exchange effect. 2 REITs to take note for this matter are IREIT Global and Frasers Logistics and Industrial Trust. Below is list of top 5 REITs that have most NAV per unit growth within past 5 years or since IPO:
Top 5 NAV Growth
Name
Approx. Value
Fortune REIT
50%
Ascendas India Trust
43%
Ascendas Hospitality Trust
27%
Mapletree Commercial Trust
27%
Mapletree North Asia Commercial Trust
24%
* Exclude those less than 2 years since listing.

Do you notice both top 5 DPU growth and NAV growth are same REITs ? 
Now, let's explore other growth indicators besides DPU and NAV
We all know that for financial metrics like interest cover ratio, property yield, distribution over capital and distribution over gross revenue, the higher value the better. However, besides looking at current value, it is also important to look at past growth information of these financial metrics.

3) Interest Cover Ratio Growth (from Debt Profile of REITs)
Top 5 REITs that have highest interest cover ratio growth within past 5 years or since IPO:
Top 5 Interest Cover Ratio Growth
Name
Approx. Value
Parkway Life REIT
28%
Keppel DC REIT
27%
Ascendas Hospitality Trust
25%
Fortune REIT
19%
Capitaland Mall Trust
18%
* Exclude those less than 2 years since listing.

4) Property Yield Growth (from Basic Financial Metrics of REITs)
Top 5 REITs that have highest property yield growth within past 5 years or since IPO:
Top 5 Property Yield Growth
Name
Approx. Value
BHG Retail REIT
10%
Lippo Mall Indonesia Retail Trust
9%
Suntec REIT
5%
Soilbuild Business Space REIT
3%
First REIT
2%
* Exclude those less than 2 years since listing.

5) Distribution over Capital Growth (from Uncommon Financial Metrics of REITs)
Top 5 REITs that have highest distribution over capital growth within past 5 years or since IPO:
Top 5 Distribution over Capital Growth
Name
Approx. Value
Frasers Commercial Trust
18%
Suntec REIT
5%
BHG Retail REIT
2%
AIMS AMP Capital Industrial Trust
2%
Ascendas Hospitality Trust
1%
* Exclude those less than 2 years since listing.

6) Distribution Margin Growth (from Uncommon Financial Metrics of REITs)
Top 5 REITs that have highest distribution margin growth within past 5 years or since IPO:
Top 5 Distribution Margin Growth
Name
Approx. Value
Ascendas Hospitality Trust
40%
Frasers Commercial Trust
31%
Ascendas India Trust
14%
Capitaland Retail China Trust
11%
Keppel REIT
9%
* Exclude those less than 2 years since listing.
Investing is always a choice
What if a REIT has high financial metrics value but decreasing over time ? Is is better than a REIT with low value but increasing overtime ? In another words, do you choose a good REIT with its fundamental deteriorating slowly or do you bet on a poor fundamental REIT which shows sign of growth ? It is a tough choice isn't it ?

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