Asked on 13 May 2019
I’ve been monitoring these two stocks for some time and contemplating whether to get this over which to buy. I’ve done all the backtesting but still feel both have their pros and cons. Should I just split the capital and invest in both instead?
Probably now is a good time to look into both REITS to see if it is still a good company to buy into.
Personally in the short run, both REITS will see decrease in earnings
But in the long run, they should do just fine.
You can check out my video where I reviewed about Capitamall Trust
It's always interesting when you come across 2 companies that are direct competitors within the same sector / industry. It's akin to Alibaba v.s. Amazon / Mastercard v.s. Visa.
But allow me to add on a couple of points:
You can take a look at the tenant mix, a strong tenant would indicate that the chain of malls under the group wins over another. If you notice, Haidilao is never in a Frasers Mall (perhaps due to the high rental? or mall accessibility? Being an investor of the company is like bring a tenant of the mall, having confidence in the landlord's ability to bring you business
What are your pros and cons list? Care to share? How are the yields on both right now?
For me, I have a bias preference to Capitaland. I used to be pro-Frasers (in all their REITs actually) because of their prices but I came to the realisation that it's never about the price, it's the underlying business quality (and locations for REITs).
If you noticed, Capitaland malls are mostly nearer to MRT as compared to Frasers. I believe this is due to their link with the government, so in a way they get the "advantage" on the locations. For Frasers, I think one of the better ones is Northpoint.
By at the end of the day, I think it's okay to have a stake in each of them, both are pretty solid!
Capmall Trust and fraser Centrepoint portfoilo is very dependendet on traffic footfall at its malls. They are retail malls mainly by portfoilo breakdown and therefore they are dependent on footfall which in turn translates to shopper sales.
Over the past few years, the traffic volume of shoppers has plateued and this is due to slower population growth.
If you are confident that Singapore's population will keep growing, both REITS are a good option. If people are curious, how did I link it to population here is the chain of thoughts.
Higher population, more people and in turn footfall of shoppers visiting capland malls. With that it translates to higher revenue for shops and in turn the mall owner which is capmall trust is able to increase its rental which trickles down to profits and dividends for the REIT unitholders
FCT seems to have a more consistent DPU history, while CMT had a slight dip during the GFC.
But keep in mind that past successes are not indicative of future successes. FCT's current CEO will retire on 1 July. How the incoming CEO will preform is anyone's guess!