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REITs
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    Sandra Teo
    Sandra Teo
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    Top Contributor (Mar)

    152 Answers, 298 Upvotes
    Answered 4d ago
    Hello! According to a bloomberg report, S-REITs offer yields exceeding those listed in Australia, US and Japan. One reason why S-REITs are able to pay higher dividends is due to the regulation for S-REITs to distribute at least 90% of taxable income each year to enjoy the tax exempt status by IRAS. The S-REIT sector is the 6th largest globally , with a market capitalization of US$53 billion. UK REITs has the largest market cap standing at $3.4 trillion capturing 6.3% market share. In Asia, S-REIT is the third largest REIT market after Japan and Australia.
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    Sandra Teo
    Sandra Teo
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    Top Contributor (Mar)

    152 Answers, 298 Upvotes
    Answered 4d ago
    Hello! One of the reasons for this merger is the motivation to become a mega cap REIT, which provides many benefits for the REIT. A REIT is considered a mega cap REIT once it obtains substantial market cap and assets under management. They will thus be able to issue bonds at cheaper interest rates, gain greater access to instituational funds for private placements and greater ability to develop new properties. The proposed merger will increase the total asset of the merged REIT to S$6.8 billion, and market capitalisation to S$42.9 billion. Prior to the merger: OUE Hospitality Trust - NAV: $0.75 - PB: 0.980 - DPU: 0.0499 - Dividend Yield: 6.79% UOE Commercial REIT - NAV: $0.71 - PB: 0.732 - DPU: 0.0348 - Dividend Yield: 6.69% After the merger (pro forma) - NAV: $0.62 - PB: 0.919 - DPU: 0.0348 - Dividend Yield: 6.11% For OUE Hospitality Trust shareholders, the buyout is below book value/NAV and the dividend yield drops. For OUE commercial REIT shareholders, the NAV decreases by 12.7% (highly dilutive), there is an increase in gearing ratio and there is a potential decrease in price as OUE commercial REIT had never traded near book value/ NAV. The merger icnreases the gearing ratio to 40%, while still below the MAS regulation of 45% it is significantly higher than the average of S-REITs gearing ratio at 37%. TL;DR: The merger is slightly DPU accretive to shareholders but highly dilutive based on NAV per unit. This is due to the OUE Commercial REIT units being issued at a massive discount to NAV in order to buy properties at fair value.
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    Isaac Chan
    Isaac Chan, Business at NUS
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    Top Contributor (Mar)

    241 Answers, 514 Upvotes
    Answered 1w ago
    Just attended their AGM this morning for FY18! I will leave a few highlights from the meeting, as well as some of the thoughts I have on this REIT. Before I dive into my analysis, this was the first AGM I had ever attended! The AGM was held at Star Vista, one of the properties of CMT. After reaching at 940AM, the number of retirees and old folks there really surprised me! Due to the strong and steady performance of the REIT, the crowd also wasn't too emotional (maybe because it was too early) Business Profile CMT is a very popular and well known REIT, which has performed very well over the years since its IPO. It currently has 15 properties worth $10.5 Bn. Some of their iconic malls include Bedok Mall, Bugis+ and Tampines Mall. They have an extensive network of tenants of 2,800 with a portfolio occupancy rate of 99.2% and 338 million in annual shopper traffic. With such an extensive and mature portfolio, CMT seems to be strong. Results Income Stats Despite a slight dip in 2017, gross revenue had recovered to 697.5 million by 2018, a YOY increase of 2.2%. Both net property income (NPI) and distributable income (DI) both had the highest percentage increase YOY. NPI with 3.2% at 493.5mn and DI with 3.8% at 410.7mn. The strongest contributors were Plaza Sing, Tampines Mall and Bugis Junction. Balance Sheet Data 2018 was a year where CMT had taken on the most amount of debt at 3,683mn, most likely to fund the development of its new properties. Portfolio property valuation also saw a significant increase of more than 10% to 10,076mn due to investment properties related to Funan. The most highly valued properties were WestGate, Plaza Sing and Bugis Junction. Key Financial Indicators DPU experienced a significant increase from 11.16 to 11.50 cents, an increase of 3%. This is significant, considering that DPU had remained stagnant in 2016 and 2017 at 11.13 cents and 11.16 cents respectively. Despite the loading of debt, aggregate leverage remained the same as previous years, at 34.2%. This suggest that CMT has a healthy debt profile, and could taken on more debt in the future to grow. An increasing Net Debt/EBITDA suggest that the trust is taking on more debt faster than earnings, but based on their healthy credit profile, I don't think this should be a concern. Relative Share Price Performance For 2018, CMT share price experienced a return of 6.1%, despite the STI, FTSE ST REIT and FTSE ST Real Estate decreasing substantially over the year. I believe that this occured because of the defensiveness and maturity of CMT's shopping malls, as well as investor expectations of the RETI's performance with their upcoming malls. Growth Strategy Unique Shopping Experience of Mall What caught my attention the most during the AGM, was the presentation of how Funan will provide an integrated shopping experience with both online and offline features. Instead of fighting e-commerce head-on, I think the mall is right in trying to grow omni-channels with Funan itself, such as housing online presence such as Alibaba and having 24 hour shopping pick-up points. Interestingly, Funan will also include showers for fitness enthusiasts and bike stops so that cyclist can make Funan their last stop. The mall will even include a rooftop soccer court. In my mind, this is probably the right strategy to adopt, since this kind of unique retail / lifestyle experience can't be adopted. I also like how the malls also have a strategy to draw both weekday and weekend crowds, and focus less on just attracting the best tenants, but drawing crowds in just for the mall experience. Potential Divestment of J-Cube Unlike the other properties, J-Cube isn't performing so well, and management is open to having the mall being divested, just like it had with Sembawang Shopping Centre last year. The reasons for the more lacklustre performance could be due to how crowded the retail space is with JEM, IMM and Westgate. However, Prof Richard J. Magnus cited how government plans to develop the residential place in Jurong will drive high footfall in the long run, and that they are open to different possibilites regarding J-Cube. Interesting Questions Asked “What if Jewel cannibalises the other malls? This I believe, is quite a valid risk, since CMT has Tampines Mall and Bedok Mall already. CEO Tony Tan agreed that Jewel might cannibalise their other malls, citing that the hype of Jewel will most likely draw crowds from around the island. However, he argued that once the hype dies down, it is unlikely that Jewel will continue to cannbalise. Also, he mentioned that in the long run, the target audience for Jewel would be tourists and locals at the airport. Hence, their other malls serve different markets. I kind of half-agree with Mr Tan’s response, since unless you are a shopping enthusiast, you would most likely have to choose between one of the malls to visit nonetheless. Personally, I have experienced this dilemma myself even between Bedok Mall and Tampines Mall already (I live 10 mins from Bedok Mall). In the short run, consumer appetites might increase to shop more, but I believe that eventually it will taper off and consumers would need to choose between the malls. “What about overseas expansion?” This was also a fairly good point made, since the Singapore market is limited and retail density is already quite high. Management responded that the main focus of CMT would still be the Singapore market. Mr Tan argued that the overseas retail space was turbulent as well, which seems to suggest that the option of expanding overseas is not as enviable as it seems to be. Besides, institutional investors were also focused on the local market for the local retail market exposure and the safety of the SGD currency. Risks High Malls Concentration As can be seen, most of their malls are located in CBD, which may potentially cannablise each other. However, I am more concerned about the opening of Paya Lebar Quarter and Jewel in the East (not shown in image) Having lived in the East all my life, I believe that the retail market there is very saturated already. For eg, Tampines One, Tampines Mall and Century Square are situated right next to each other while sandwiching Tampines MRT Station. Paya Lebar Quarter will also compete with Parkway, Katong Mall, OneKM, Singpost Centre and Paya Lebar Square. Although Mr Tan responded that the new developments of private condos along the East Coast and the BTO flats next to Bedok Mall will be ready in a few years, it still seems that there are too many malls fighting for the same market. Limited Singapore Market As some of the unit-holders pointed out, the market in Singapore is very limited based on our population and the space to develop malls. In fact, Mr Tan agreed that this was the biggest challenge facing CMT, more than e-commerce. I agree with management’s view to create a more unique retail experienced, but there are some potential pitfalls. Firstly, the malls are still competing with e-commerce sites heavily. Secondly, other malls are starting to adopt such a strategy as well, which means that differentiating CMT’s malls with the rest would become more challenging. Thirdly and probably most importantly, carving out space for such experiences do not generate immediate rental income. By carving out more space for such non-commercial activities like soccer courts, there is less space for tenants to lease which means possibly lower rental income. Conclusion As a whole, CMT has performed really well, and should perform even better throughout the year. Yet, I do believe the fight for the Singaporean shopping dollar will only become fiercer. Nevertheless, CMT still seems well poised to adapt to such changes. My first AGM was interesting so say the least! Didn't get to try any buffet food, but we managed to get $20 CapitaLand vouchers, which we spent on LiHo for the team. At least that was memorable :)
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    Gabriel Tham
    Gabriel Tham, Kenichi Tag Team Member at Tag Team
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    Top Contributor (Mar)

    618 Answers, 1021 Upvotes
    Answered 1w ago
    If you intend to purchase monthly then Roboadvisor would seem to be the better option because it will lower your overall fees and expenses. Else, you can consider to collect 300/month and then buy stocks with the saved up amount. 300/month to buy individual stocks each month will end up with you giving away too much in fees.
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    Hariz Arthur Maloy
    Hariz Arthur Maloy, Independent Financial Advisor at Promiseland Independent
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    Top Contributor (Mar)

    503 Answers, 823 Upvotes
    Answered 2w ago
    It would depend on the % of your loan. I'd clear anything higher than 4% per annum. For your HDB loan, instead of trying to clear it quick, just switch from paying with CPF to paying with cash. Btw, Bonds and FD will only give you about 1.5-4% return. Clearing your loan would also give you a similar "return".
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    Sandra Teo
    Sandra Teo
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    Top Contributor (Mar)

    152 Answers, 298 Upvotes
    Answered 2w ago
    Here's an update on CCT's financial results based on its 2018 annual report. Portfolio Value Due to the capital appreciation of its existing properties and acquisition of prime office real estate its portfolio value grew at a CAGR of 7.2% over last 10 years from S$5.7 billion in 2009 to S$10.6 billion in 2018. Gross Revenue Due to steady growth in gross revenue from Capital Towoer, RCS & Six Battery Road and injection of revenues from CapitaGreen & Asia Square Tower 2, CCT's achieved a CAGR of 3.7% in gross revenue, increase from S$403.3 million in 2009 to S$557.4 million in 2018. Distributable income / Distribution per unit (DPU) Distributable income grew by a CAGR of 5.5% from S$198.5 million in 2009 to S$312.7 million in 2019. Therefore growing its distribution per unit from 7.06 cents in 2009 to 8.70 cents in 2018. CCT is trading at a PB ratio of 1.07, significantly higher than its 10 year average of 0.92. However, its current dividend yield is 4.53%, which is below its 10 year average of 5.56%. CCT's current gearing ratio is 34.9% which is significantly below MAS's limit of 45%. Future Outlook Following its acquisition of Galileo (located in Frankfurt's CBD) in Jun 2018, it is expected to contribute its first full financial year of results in 2019. Additionally, the redevelopment of Golden Shoe Car Park is expected to be completed in first half of 2021. TL;DR: CCT has steady growth in revenue, DPU over the last 10 years. In terms of outlook, the major growth driver will be Golden Shoe Car Park and Galileo. CCT is trading above its P/B ratio average, suggesting it is expensive to buy now.
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