Why Have Institutional Investors Been Buying These 2 Billion-Dollar REITs?
There are many ways to find investment ideas. You can screen for stocks or look at a list of stocks near their 52-week lows to sieve out potential bargains. You can also study what institutional investors have been buying or selling.
Disclaimer: This is not a sponsored post. Opinions expressed in the article should not be taken as investment advice. Please do your own due diligence.
Institutional investors are typically large investment organisations such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies, and so on. These investors tend to possess vastly greater resources than individual investors like you and me when it comes to researching stocks. So, it may be useful to keep a close eye on what they are doing as a way to generate ideas.
Let’s look at two Singapore REITs that have seen the highest net purchases in dollar value by institutional investors for the week ended 22 March 2019:
- Mapletree Industrial Trust (SGX: ME8U)
- Keppel REIT (SGX: K71U)
| Company | Mapletree Industrial Trust | Keppel REIT |
|---|---|---|
| Net purchases by institutional investors (S$ million) | 5.6 | 4.5 |
| Current P/E Ratio | 12.89% | 29.29% |
| Market Cap (billion) | 4.2 | 4.3 |
Sources: Singapore Exchange; SGX Stock Facts
1. Mapletree Industrial Trust (SGX: ME8U)
The first REIT that saw its shares being bought heavily by institutional investors is Mapletree Industrial Trust (MIT) with
- 86 industrial properties and 14 data centres in the U.S. (through its 40% joint venture)
In the latest quarter ended 31 December 2018, MIT’s gross revenue grew 2.3% year on year to S$93.6 million, while net property income improved by 1.4% year on year to S$71.9 million. The improvement was primarily due to income contribution from the build-to-suit project for HP Singapore as well as contributions from new properties.
Similarly, the REIT’s distribution per unit (DPU) was up by 6.6% year on year to 3.07 Singapore cents.
Tham Kuo Wei, chief executive officer of MIT’s REIT manager, made the following comments:
“We are pleased that our strategy of growing the Hi-Tech Buildings segment has yielded positive results. The year-on-year growths in distributable income and DPU were bolstered by the higher contributions from the development projects in Singapore and 40% interest in the portfolio of 14 data centres in the United States. These have helped to mitigate the headwinds we are experiencing in the Singapore industrial property market.”
As of 31 December 2018, the REIT’s gearing stood at 34.7%, and its committed occupancy rate stood at 88.2%.
Stock Discussion on Mapletree Ind Trust
2. Keppel REIT (SGX: K71U)
The next REIT that saw its shares bought by institutions recently is Keppel REIT, a real estate investment trust with a focus on commercial properties. Its portfolio currently consists of nine office assets located in Singapore and Australia.
Unlike Mapletree Industrial Trust, Keppel REIT delivered a weaker financial performance recently.
For the quarter ended 31 December 2018, Keppel reported that property income declined 14.8% year on year to S$37.8 million, while net property income (NPI) fell by 15.8% during the period to S$30.5 million.
The weaker performance was due to lower income from Ocean Financial Centre, 275 George Street, and 8 Exhibition Street. Consequently, distribution per unit (DPU) was down by 4.9% compared to the same period last year, to 1.36 Singapore cents.
As for its outlook, here’s what the company said in its press release:
“Amidst a volatile macro-economic environment, the Manager remains focused on delivering stable and sustainable distribution through ongoing portfolio optimisation, as well as driving operational excellence in its asset and capital management efforts.”
As of 31 December 2018, the REIT’s gearing and occupancy ratios stood at 36.3% and 98.4%, respectively.
The Foolish bottom line
Looking at what institutional investors are doing could be a useful tool when sourcing for investment ideas, but do note that the information presented here is by no means a recommendation to take any action on the stocks mentioned. Instead, it should be viewed only as a useful starting point for further research.
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