Thursday, March 28, 2013

Ready to dump REITS?

For anyone who has not read the post written by FFN recently, I would recommend you to go to his site to read on his recent post on the possible bubble on REITS (Link here). I think he provides a great insight and an interesting perspective that all of us as a REITS investor can take away something from.
 
As we have ended the 1st Quarter of 2013, let us take a look at how REITS have performed relative to their 2012 closing price.

Rank – Capital Gains

REIT
Mar-13
Dec-12
Gain
First REIT
$1.250
$1.060
17.9%
PLife REIT
$2.530
$2.150
17.7%
Cambridge
$0.790
$0.675
17.0%
FE-Htrust
$1.175
$1.005
16.9%
StarHill
$0.890
$0.785
13.4%
MGCT
$1.040
$0.930
11.8%
Sabana REIT
$1.265
$1.140
11.0%
MCT
$1.345
$1.215
10.7%
Ascendasreit
$2.600
$2.370
9.7%
A-Htrust
$1.030
$0.940
9.6%
CDL Htrust
$2.050
$1.880
9.0%
Fortune Reit HK$
$6.860
$6.370
7.7%
SuntecReit
$1.800
$1.675
7.5%
FrasersCT
$2.140
$2.000
7.0%
FCOT
$1.410
$1.320
6.8%
CapitaRChina
$1.750
$1.645
6.4%
MapletreeLog
$1.215
$1.145
6.1%
AIMSAMPIReit
$1.575
$1.495
5.4%
CLT
$1.305
$1.240
5.2%
LippoMapleT
$0.515
$0.490
5.1%
K-REIT
$1.360
$1.295
5.0%
SaizenREIT
$0.190
$0.181
5.0%
MIT
$1.405
$1.360
3.3%
AscottREIT
$1.380
$1.360
1.5%
CapitaMall $ 2.09 $ 2.13
-1.9%
CapitaComm
$1.585
$1.685
-5.9%
Source: SGX Reit Data

Not surprisingly, REITS have once again taken the spotlight and outperform the STI index for the 1st Quarter of 2013. Yields for some of the best performing REITS like PLife Reit and First Reit have further compressed to 4.1% and 5.7% respectively. We also have many other REITS yielding 4+% and 5+% which may suggest further capital appreciation is limited. A good example would perhaps be retail REITS - CapMall Trust which is currently yielding 4.4%. The price is trading at a range for a good recent few weeks and the low volume buyer on CMT may suggest exhaustion on this particular REIT.
 
Personally for me, I am ready to take profits on PLife Reits and FCT. It has risen by some 36% and 27% (excluding dividends) since I last bought them. The probability for the downside to its price is probably much higher than the upside. Also, I don't foresee FCT injecting Changi City Point in its portfolio in 2013 based on its past records and a more likelihood will come in 2014. Until then, we'll never know what kind of "Cyprus incident" there may be out there.
 
There are currently many investors out there who are asking for advice and waiting for a pullback to enter REITS and they may be somewhat disappointed based on what they see for the 1st Quarter. Based on my past investing experience, the risk has somewhat increased a lot now to enter REITS. With talks from the FED and analysts that the interest rates may somewhat go up in the early 2014, prudent investors may want to take note of the risks they are getting into should you decide to enter REITS today.

6 comments:

  1. Hi,

    Thanks for recommending my link! I didn't know it was a good write-up. Hehe.

    ReplyDelete
    Replies
    1. Hi FFN

      haha you have shared some interesting thoughts on your write-up and a good wake up call for all REITS chaser ;)

      B

      Delete
  2. It's probably a strange thing - but people usually notice a sector only AFTER it has risen a lot, and when more and more people pile in, you know that a lot of optimism is priced in and therefore the investment cannot be lucrative any longer.

    ReplyDelete
    Replies
    1. Hi Musicwhiz

      Exactly!!!. I was thinking if it was because of the media that brings the attention to all this people. So during bad times, the media injects fear into the people and during bull time, the media injects optimism to this very same people.

      B

      Delete
    2. Herd behaviour =(

      "Be fearful when others are greedy..." - Sage of Omaha

      Delete
  3. i think posts like this at least makes me happy that people are trying to reign in expecations and making valuation as a key subject matter.

    having said that, don't think you should sell those 2 unless you are trading them. you are practically selling two of the top reits (one being an inflation hedge and fraser is a good manager)

    unless you are 100% invested

    ReplyDelete

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