facebookInject Your Stock Portfolio With These 3 Pandemic-Proof Singapore REITs



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Inject Your Stock Portfolio With These 3 Pandemic-Proof Singapore REITs

profileSudhan P

“Can it survive a pandemic?”

…is probably a question investors would add to their investing checklist now that they know how a pandemic can disrupt lives and businesses.

With the benefit of hindsight, there are clearly companies that have not only survived a global health scare but have thrived through it. Companies that come to mind include Zoom, Netflix and Amazon.

There are certain listed companies in Singapore that have done well despite the global pandemic as well.

Here, let’s take a look at three real estate investment trusts (REITs) that have proven to be resilient business-wise amid COVID-19 and could go on doing well for many years to come.

REIT #1: Elite Commercial REIT

Elite Commercial REIT (SGX: MXNU) was listed in February 2020 when the pandemic was just taking hold of certain parts of Asia.

The REIT’s portfolio now consists of 155 largely freehold commercial properties located across the UK after 58 assets were acquired in March this year.

Source: Elite Commercial REIT investor presentation

Of the 155 buildings, 150 of them are freehold in nature while the remaining five are on long leasehold tenures. As of 31 March 2021, the weighted average lease to expiry (WALE) was a lengthy 7.2 years.

More than 99% of Elite Commercial REIT’s portfolio is leased out to the UK government via The Secretary of State for Housing, Communities and Local Government.

This makes the REIT a resilient one. In fact, Elite Commercial REIT mentioned in its investor presentation that it “continues to provide stable income to its unitholders as COVID-19 has minimal impact on business and rent collection”.

For the reporting period from listing date to 31 December 2020, distribution per unit (DPU) stood at 4.44 pence, 2.3% higher than its initial public offering (IPO) forecast of 4.34 pence.

Source: Elite Commercial REIT earnings presentation

For the first quarter of 2021, DPU was 1.8% higher than the IPO forecast as well.

There’s potential for more growth in the coming years. Elite Commercial REIT has a right-of-first-refusal (ROFR) agreement with its sponsors, so that will give it a pipeline of assets to acquire.

A ROFR agreement ensures that the sponsor will offer properties to the REIT first before offering them to any third-party companies.

At Elite Commercial REIT’s unit price of £0.665, it has a price-to-book (P/B) ratio of 1.1x and an annualised distribution yield of around 7%.

REIT #2: Frasers Logistics & Commercial Trust

Frasers Logistics & Commercial Trust (SGX: BUOU), as the name might suggest, is a REIT that has logistics and commercial properties.

Frasers Logistics & Commercial Trust’s portfolio contains 103 properties across five countries, including Singapore.

Source: Frasers Logistics & Commercial Trust investor presentation

The REIT is also one of the highest yielding Straits Times Index components with a distribution yield of 4.7% at its unit price of S$1.40.

Prior to its merger with Frasers Commercial Trust in April 2020, Frasers Logistics & Commercial Trust’s DPU grew 4.4% to 1.90 Australian cents for the second quarter of FY2020 (financial year ended 30 September 2020).

For its first half of FY2021, DPU increased by 9.5% year-on-year to 3.80 Singapore cents with the merger helping to boost DPU. For context, Frasers Logistics & Commercial Trust adopted the Singapore dollar as its reporting currency with effect from 15 April 2020.

In terms of COVID-19-related business disruption, the REIT said that there’s “no material impact” to its portfolio due to the pandemic.

Source: Frasers Logistics & Commercial Trust investor presentation

Frasers Logistics & Commercial Trust’s portfolio gives investors exposure to the attractive new economy sectors, which refer to high-growth industries such as third-party logistics, e-commerce, and technology.

Of the 103 properties in Frasers Logistics & Commercial Trust’s portfolio, 95 of them belong to the logistics and industrial space.

With the pandemic accelerating online retail spending, there will be continued demand for logistics real estate to fulfil the warehousing needs of e-commerce players.

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REIT #3: Keppel DC REIT

Keppel DC REIT (SGX: AJBU) is a data centre REIT and is also one of the featured companies in our Investing in 2021: 9 Stocks to Consider Buying for the New Year report.

As of the first quarter of 2021, Keppel DC REIT’s portfolio had 19 data centres located in key data centre hubs such as Singapore, Australia and the United Kingdom.

For the latest quarter, the REIT’s DPU improved by 18.1% year-on-year, supported by contributions from acquisitions and asset enhancement initiatives in 2020.

It has continued from its strong performance in 2020 where DPU increased by 20.5% to 9.17 Singapore cents.

Overall, I like Keppel DC REIT for its strong competitive advantage. According to Keppel DC REIT’s IPO prospectus, the data centre industry has high barriers to entry due to:

  • The need for substantial upfront costs and significant technical knowledge and expertise;
  • Customers preferring data centre providers with a proven track record; and
  • A lack of suitable sites for data centres.

As data centres are typically mission-critical, clients tend to be averse to physical relocations as they operate mission-critical IT processes in data centre facilities. Relocations tend to increase operational risks, including possible downtime and business disruptions.

Keppel DC REIT is also a great proxy to the fast-growing technology sector, where technology adoption has accelerated due to the pandemic.

Source: Keppel DC REIT investor presentation

At Keppel DC REIT’s unit price of S$2.53, it has a P/B ratio of 2.1x and a distribution yield of 3.6%.

Have Burning Questions Surrounding The Stock Market?

You can participate in the lively discussion regarding REITs here at Seedly and get your questions answered right away! 

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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