SREIT 101 - Part 2

This week will be part 2 of my SREIT series...

How many REITs are listed on the SGX?

Running a quick scan on the SGX website (http://www.sgx.com/wps/portal/sgxweb/home/marketinfo/securities/reits), there are a total of 27 different REITS listed on SGX.

How are they classified?

Following last week classification on the different type of SREIT, I shall provide a quick breakdown of the different type of segment:

1) Retail

Fraser Centrepoint Trust

Capitamall

Croesus Retail Trust

Fortune Reit

Lippo Mall Trust

Mapletree Commercial

Starhill Reit

Suntec Reit

CapitaRetail China

2) Industrial

Aims AMP Reit

Cambridge

Cache

Ascendas Reit

Mapletree Industrial Trust

Mapletree Logistic Trust

Ascendas India Trust

3) Office

Fraser Commercial Trust

CapitaCommercial

K Reit

Mapletree Greater China Commercial

Sabana Reit

4) Residential

Saizen Reit

5) Hospitality

Ascott REIT

CDL Hospitality Trust

Ascendas Hospitality

First Reit

Parkway Life Reit

Do note that some of the REITs have a mixed usage of retail and office like Suntec, Starhill and Mapletree Greater China Commercial (one retail building in HK, one office building in China).

How should you invest in them?

A good start will be to analyze the (1) dividend yield that the REIT is offering.

However, the risk is that a high dividend yield can be a result of the low price on the stock. That is where is risk is. Because like what a typical Singaporean will say: "good thing no cheap, cheap thing no good".

I am not about to start the market efficiency hypothesis debate here, but market is, in my opinion, most of the time efficient. 

So some stocks are not cheap without a REASON.

That's why investor should take a lot of precaution when investing.

The next area to look at will be the (2) geographical region you want to invest in. If you are bullish in the Indian property sector, buy the Ascendas India Trust. If you think the China retail property is the next big thing, buy the CapitalRetail China. You know what I mean.

The third thing you should take note will be (3) the property segment you will like to invest in. As you can see above, there are the 5 different segments of REIT for you to invest in and you can trade or invest them base on different themes.

1) Retail - Basically, retail is considered the most recession proof & resilient among the 5 segments. Why is it so? Think about what you see in most of the heartland shopping mall around your neighbourhood. Each shopping mall usually has an supermarket and that's what make them so resilient. No matter what happened to the state of the economy, you and I will still need to go and shop for our daily grocery. Thus people will always shop in retail no matter what. This segment benefit a lot on staple consumption from the domestic market.

2) Industrial - I will consider them in between retail and office as like office their activities are tied to the overall state on the economy. However, industrial segments usually charged less compared to the office sector. So being cheap, the tenants are usually more tolerant.  

3) Office - I will argue that the office segment has the most beta element to the overall economy. Because when an economy is bullish, MNCs and big financial institute will massively hired and thus the requirement to increase the office space. But when the downturn hit, they are usually the first to pull out.

4) Residential - Nothing to comment here as the only residential listed is Saizen, which is very much a Japan country play.

5) Hospitality - Within this segment it will be tricky as there are the likes of hoteliers and the hospitals. Hospitals are generally considered, like retail, recession proof which is pretty obvious to all of us. The hoteliers will be like office as they are exposed to tourist crowd which is very much a consumer discretionary story. 

The last thing you should look at is the (4) quantitative & qualitative strength of each individual REIT and this is where the alpha is.