Best REITs In Singapore 2019
Singapore is one of the best markets right now for one to invest in. Be it in the Singapore Exchange Limited (SGX) or in the property markets, one will definitely get a good return. However, it is important to understand that even on the SGX, there are various products from which an investor can choose to put money on. Apart from the usual company shares, one can invest in Real Estate Investment Trusts (REITs).
What are REITs?
According to Investopedia, REITs are investment vehicles that compare in a manner to mutual funds. This is to say that investors can earn income from the money they give to real estate companies to create real estate portfolios. This is unlike the stock market where one can own a bunch of stocks from which one earns profits from interest earned on every single share that one owns.
Interestingly, REITs offer a constant stream of income. This is because REITs are legally required to give away 90% of their income to the shareholders. This is usually termed as dividends. Actually, this makes for a solid source of long-term income. This becomes more interesting when one enters the Singapore market.
Like aforementioned, Singapore is one of the most sought after markets at the moment. There is a lot of talent flocking the city-state in search of better jobs. Actually, Singapore has most of the leading employers that top the Best Employer charts serially.
REITs in Singapore
As of 2018, SGX had 41 REITs listed. However, their performance is varied in terms of both volume and value. Further, the exchange divides REITs into various categories depending on the purpose the developed space plays.
For instance, the official categories on Singapore Exchange Limited (SGX) are Office REITs, Healthcare REITs, Industrial REITs, Hotel and Hospitality REITs, Residential REITs, Retail REITs and Specialised REITs. Essentially, REITs are categorized as per the industry they serve.
Before investing in REITs, it is prudent to first understand the basics of the sector they serve. This is for the reason that a REIT performs poorly if the industry it serves is in a tailspin. Basically, REITs offer space for various purposes. For instance, a retail REIT will rent out spaces to shopping malls, department stores, et cetera.
Therefore, if the retail sector is generally underperforming, it will affect the take up of the spaces. As a result, there will be no income to distribute to the shareholders. Given that most REITs acquire their capital from loans, bad times could even lead to a REIT winding up entirely. Basically, this means one could lose their money.
REITs to invest in 2019
As per the latest market update, the REITs sector is the second best performing on SGX. Fundamentally, the market is a safe investment vehicle given the fair value of returns. According to the latest standing in terms of market volume, the following are the best REITs to invest in for the coming year.
Ascendas has remained the best REIT in Singapore for quite some time now. As the Motley Fool reports, the company has put up excellent numbers since the third quarter ended in December 2017. At the time, the REIT had a market capitalization of S$7.62 billion.
Also, it reported a 4.1% year-on-year revenue growth. In addition, the REIT posted a net property income (NPI) of 1.7% in the same period. With a distribution per unit (DPU) metric of 3.97 cents, this makes it one of the best companies to invest in.
Interestingly, Ascends Real Estate Investment Trust is still posting the rosy numbers. The latest figures from SGX indicate that the company is still on top in terms of market capitalization. With the entry of more business in the industrial sector of the economy, it is only fair to say that there is going to be more demand for such space. Therefore, Ascendas is still the best option for investments in the coming year.
CapitaLand Commercial Trust (CapitaCom) REIT
For most of 2018, this REIT has taken the third spot on the market capitalization list. However, a series of strategic decisions and moves have brought the REIT to second place. Currently, the REIT boasts a volume of a little over 16 million. This brings the value to another good figure just above S$28 million. The jump is probably due to the rising demand for office space in the city-state.
Further, the office real estate sector appears to be on the upward trend for the coming year. Essentially, this implies more business for CapitaCom going forward. Therefore, investing in the REIT will definitely, bring handsome returns in terms of dividends.
CapitaLand Mall Trust (CapitaMall) REIT
This is the third most valuable REIT in terms of volume. However, it is still ahead of CapitaCom in terms of the total value. What makes this REIT attractive is the fact that it is exhibiting revenue growth after poor performance early this year. As per company data, CapitaMall is slowly gaining from the 1.1% year-on-year loss it experienced as in the full year ended 31 December 2017.
Improving market conditions coupled with better financial performance are just a few of the positive indicators of why the REIT is worth investing in the coming year. Also, although retail real estate is still facing the challenges of depressed demand, increased consumption among Singaporeans and visiting tourists will definitely push demand up.
Mapletree NAC Trust
This is one of the surprising acts of 2018. The REIT is diversified in that it offers the best cushion in cases of a sudden downturn. Since late 2017 and early 2018, the REIT has seen its revenue grow although at a snail’s pace. However, the slow but steady growth has seen the REIT appear favourable in the eyes of many investors.
Further, the REIT is seeing continued growth in its net property income, an area where most of the other REITs are performing dismally. In addition, the REIT is still engaging partners in new projects that will see the total portfolio of the REIT increase. As a result, the increased portfolio will see an increased revenue stream.