How to Search for REITs using Filters

Start the filtering with the follow the 4 step process that you have learnt during the webinar session:

  1. Select DPU Growth (3-Years) - exclude negative
  2. Select NAV Growth (3-Years) - exclude negative
  3. Select Interest Cover - exclude Very Risky and Risky
  4. Select the sectors that you are interested to invest in (I usually just exclude Hospitality)

Congratulations! You would have found 5 REITs: image.png And the 5- REITs are: image.png These would help you shortlist potentially high quality REITs in Singapore. These are 5 REITs you probably want to pay attention to and put on your watchlist. Repeat the steps above, but use 5-years instead of 3 for DPU and NAV, and you should get 6 REITs: image.png Repeat the steps above, but use 7-years instead of 3 for DPU and NAV, and you should get 9 REITs: image.png So essentially applying what you learnt, we are looking for REITs that have been short-term, medium-term and long-term quality performers on the Singapore market and they are:

  • Mapletree Industrial Trust (MIT)
  • CapitaLand Commercial Trust (CCT) - this REIT is going to merge with CMT by the way
  • CapitaLand Mall Trust (CMT) - merging with CCT as per above
  • Frasers Centrepoint Trust (FCT)
  • CapitaLand Retail China Trust (CRCT)
  • Mapletree Commercial Trust (MCT)
  • Mapletree Logistics Trust (MLT)
  • Parkway Life REIT (PLifeREIT)
  • Keppel DC REIT (KepDC) - Short-term performer
  • First REIT

Only after you have done this step to filter REITs that are growing over the years, then do you start to trim your results using other filters. I would next use the P/B Ratio to trim my results (this one is using the 7-year DPU and NAV growth filter) using P/B Ratio - Bargain, Good Value and Reasonable: image.png Now you have trimmed 9 REITs down to 6 REITs. Have you noticed something interesting? 5 out of the 6 REITs are all RETAIL REITs! And this is definitely understandable because retail has taken a hit with all the COVID-19 situations, that's why you can get these REITs at a reasonable or good value price. The only exception is First REIT which is affected because of its sponsor, so this one really is the outlier from the rest. If you filter them by P/B Ratio Expensive and Very Expensive, you will get the following 4 REITs (KepDC will be included when you use the 3-year DPU and NAV): image.png Notice that these are all specialty REITs which are less affected by COVID-19 including data centres, logistics assets, healthcare...etc. Hence in this environment, they would trade at "expensive" prices. In the current market, good things don't come cheap. And if they are cheap, generally they may not be good. Isn't it generally true in real life? Hence, the real opportunity comes when there is a crisis (like now!). Now that you have 10 REITs in your watchlist, we want to wait for a stock market correction to bring these down to Reasonable, Good Value or Bargain levels. So part of the game is being patient... lets see how the market does in the coming months and if you are ready (have your watchlist and cash prepared), you might be able to get good quality growing REITs at a Reasonable or Good Value price. Now that I have my 9 (including KepDC will be 10 but I am just using an example with the 7-years DPU and NAV growth), adding the Dividends and the P/B Ratio back, you can try removing one filter by one filter, for example:

  • Remove "P/B - Overpriced" - 9 REITs reduced to 6
  • Remove "Dividend - Depressed" - 6 REITs reduced to 5
  • Remove "P/B - Expensive" - Still holding at 5 REITs
  • Remove "Dividend - Low" - 5 REITs reduced to 3

image.pngimage.png Here are 3 REITs that you could potentially look at further at this moment in time:

  • CapitaLand Retail China Trust
  • CapitaLand Mall Trust
  • First REIT (personally, this one might have too much risk due to is sponsor so depends on your risk appetite)

But when the markets are in a correction phase, I promise you many REITs will be trading at discounts! That's your chance to sweep up fantastic deals in the market. We saw many good REITs trading in the Bargain and Good Value ranges!