HrNetGroup

HrNetGroup - just released its 1Q 2018 result, Net profit increase 45.5% from 11.2m to 16.3m. This is rather outstanding. Total Revenue increase 12.3% from 95.3m to 107m. Gross profit increase 11.3% from 32.7m to 36.4m. The Net profit was boosted by an increased of 43.5% of 6m from other income.

REVIEW OF GROUP’S PERFORMANCE

 Net profit after tax (“NPAT”) increased by 33.5% (S$4.3m) arising from growth in:

 a. Revenue by 12.2% (S$11.6m) and gross profit by 11.3% (S$3.7m):

 i. Flexible staffing: Continued business momentum, particularly in Singapore. Revenue grew by 12.8% (S$9.5m) and gross profit by 15.1% (S$1.7m).


 ii. Professional recruitment: Stellar performance in North Asia, particularly Hong Kong and Mainland China. Revenue grew by 9.9% (S$2.1m) and gross profit by 9.8% (S$2.0m).

b. Other income by S$2.0m mainly due to S$0.8m gain on revaluation of marketable securities, S$0.6m increase in interest income and S$0.5m increase in Singapore government subsidies received.


Offset by other employee benefit expenses that rose by 11.7% (S$2.0m) mainly due to S$1.2m increase in profit-sharing incentives and bonuses that was in tandem with the increase in pre-tax profits, and S$0.6m in share-based payment expenses arising from the 123GROW Plan implemented in June 2017.


 REVIEW OF GROUP’S FINANCIAL POSITION


 The Group’s current assets increased S$15.7m from S$373.2m to S$388.9m, mainly due to:

 a. a net increase in cash and cash equivalents amounting to S$3.0m which was a consequence of S$12.9m cash generated from operating activities, S$8.1m deployed in investing activities (mainly in the purchase of quoted marketable securities), and S$1.4m dividends paid out mainly to non-controlling shareholders;

 b. increase in trade receivables amounting to S$3.4m;

 c. increase in other receivable and prepayments amounting to S$0.9m; and

 d. increase in marketable securities amounting to S$8.4m. The Group’s liabilities decreased by S$1.3m from S$54.7m to S$53.4m mainly due to:


 a. the reduction of other payables and accruals by S$2.9m mainly due to the return of restricted cash to a client for outsourced payroll services; offset by

 b. the increase in income tax payable by S$1.6m.


This is a Net Net Position company whereby its total current assets of 388.9m is greater than its total liabilities of 53.4m..

NAV of 32.9 cents.
EPS of 1.6 cents for 1 Q .
Assuming a full year EPS of 6 cents . PE of 11 x is seems quite under value for the current price of 76 cents.


I think average PE of 16 x should be achievable at 96 cents.

Not a call to buy or sell.
Please do your own due diligence.

Kepcorp

Kepcorp -The current price of $8.03 has broken down its 20 days moving average at $8.05 level. This is rather bearish!

 I think it may likely to see it's price price going down to retest the 50 days moving average at about $7.89.

With oil price closing lower below $70 , I think we may see further selling down pressure.

Quote :

Oil prices pared losses on Tuesday after President Donald Trumpannounced that the United States will withdraw from the 2015 Iran nuclear deal.

U.S. West Texas Intermediate crude oil settled down $1.67 a barrel, or 2.4 percent at $69.06, well off a 4.38 percent decline earlier in the day. The settlement was delayed by nearly an hour due to extremely high trading volume. The contract rose as high as $70.84 on Monday and ended the session above $70 a barrel for the first time since November 2014.

International benchmark Brent crudefell 47 cents , or 0.6 percent, to $75.71, also paring back an earlier decline of 4 percent. Brent touched $76.34 on Monday, its best level since Nov. 27, 2014.(cnbc.com)

 KepCorp - Looking through their financial results for the past 5 years , we can notice that the Total revenue has been declining substantially from 13,282.979m in 2013 to 6,185.668 in 2017.

 I think it is still quite far away for them to grow and increase their total revenue to hit the 10B value. Similarly , the Total net income has also been decreasing from 1,884.798m in 2013 to 301.668m in 2017.

 Diluted EPS has also been going downhill from 0.504 in 2013 to 0.231 in 2017.

 Dividend is almost below half of what has been declared in 2013 of 0.48 versus 0.22 in 2017.


 Diluted EPS of 0.231 , PE is about 35.2 times. I think it is still quite a little bit high as compare to its usual PE of about 13-15 times.

Looking at the latest 1st quarter result which was being released on 

Singapore, 19 April 2018 – Keppel Corporation Limited (Keppel) reported a net profit of S$337 million for the first three months of 2018, 34% higher than the S$252 million net profit for 1Q 2017, bolstered by higher contributions from the Property Division. 

The Group achieved revenue of S$1,470 million for 1Q 2018, which was an improvement of S$222 million or 18% over 1Q 2017. The increase was underpinned by higher revenues achieved by the Property and Infrastructure divisions, which mitigated the impact of lower work volume in the Offshore & Marine Division.

I think the total net profit has also factored in the divestment gain of 289m from the property division.

I think without this divestment gain, net profit may be about the same level as in 1st quarter 2017.

So my observation is that, it may still take quite sometimes for the company to achieve the same level of  net profit as in year 2013.

The current price of $8.15 seems to be trading at a premium level as compare to its NAV of $6.311.

On a positive note , the total order book has generally increased to 4.3B as per the table below:

Another piece of good news is that they have been able to secure a first newbuild drilling rig order in 3 years.

Not a call to buy or sell.

Please do your own due diligence.

Also the company had just made announcement of a CIVIL ACTION BY EIG FUNDS.

The Company wishes to update its shareholders that KOM has been served with an amended complaint that includes an additional cause of action against KOM for allegedly aiding and abetting the fraud committed by Petroleo Brasileiro SA and Sete Brasil Participacoes SA against EIG and seeks to recover US$221 million in purported investment losses as well as punitive damages. The Company is of the view that the additional cause of action is similarly without merit and the Company will continue to vigorously defend itself. The Company will provide further updates as appropriate.

quote : http://infopub.sgx.com/FileOpen/KCL%20-%20Update%20on%20EIG%20Lawsuit.2%20May%202018.ashx?App=Announcement&FileID=502868

Keppel Corporation Limited, an investment holding company, engages in the offshore and marine, property, infrastructure, and investments businesses in Singapore and internationally. The company constructs, fabricates, and repairs offshore production facilities and drilling rigs, power barges, specialized vessels, and other offshore production facilities; researches and develops deepwater engineering works; engineers, constructs, and fabricates platforms for the oil and gas sector; undertakes shipyard works and other general business activities; and procures equipment and materials for the construction of offshore production facilities. It is also involved in the trading and installation of hardware, industrial, marine, and building related products, as well as the provision of leasing services; sourcing, fabricating, and supply of steel components; ship repairing, shipbuilding, and conversion activities; marine contracting and ship owning business; painting, blasting, and process and sale of slag; property investment, management, and development activities; fund management; golf and hotel ownership and operation; development of marina lifestyle and residential properties; trading of construction materials; development of district heating and cooling systems; electricity generation and supply, and general wholesale trade businesses; purchase and sale of gaseous fuels; and trading of communication systems and accessories. In addition, the company offers jacking systems, and heavy-lift equipment and related services; project management and procurement, towage, financial, real estate investment trust management, logistics and supply chain, warehousing and distribution, data center facilities management, travel agency, and metal fabrication services; housing services for marine workers; and technical consultancy for ship design and engineering works, as well as solid waste treatment solutions. Keppel Corporation Limited was incorporated in 1968 and is based in Singapore.

Riverstone

Riverstone’s revenue rises 2.0% to RM209.8 million on the back of higher glove orders for 1QFY2018

  Despite the impact from foreign exchange rate volatility which led to declining average selling prices, improved cost controls and operational capabilities mitigated the decline in net profit to RM31.1 million.
Gross profit margin is maintaining at a healthy rate of 22%.

  Underpinned by robust positive operating cash flow generation of RM43.5 million, the Group’s balance sheet continues to strengthen as net cash position improved to RM111.6 million  Maintains growth trajectory as strong demand propels Phase 5 of the Group’s expansion plans where total annual production capacity will increase 18.4% to 9.0 billion pieces of gloves by end-FY2018

 Overall Net profit is down 7.6% with RM31.1m ,and diluted EPS of RM 4.19 cents. EPS is about 1.42 cents (S).

 Let's say whole year eps of 5.68 cents(s). Current price at 98.5 cents , PE of 17.34 times I think is trading at full value .

theintelligentinvestor

Reply to clim : Yeah, the initial question from sporeshare is which counter has good earnings power

theintelligentinvestor

Reply : Don't take this as detailed analysis, just my 2c.

1) ROE > 20% for the past 5 years
2) CAGR 2013-17 - Revenue 23%, Earnings 22, Equity 18%. Healthcare glove expected to grow at 8-12% in the next 3 years.
3) Debt - CR 3, Debt/Eq 4%
4) Smallest among the 5 glove manufactures, but their EBIT is clearly superior, ie 2-4x of the other 4, Hartalega, Top Glove, Kossan & Supermax.
5) Lastly, as compared to the others in the list. Riverstone product has a bigger global market than the other that are more local or within regional.

Riverstone manufactures and distributes cleanroom and healthcare gloves under the RS brand in Malaysia. It also produces cleanroom finger cots, packaging bags, face masks, and wipers; and other consumables, such as hair nets, static dissipative shoes, safety booties, shoe covers, ESD rubber bands, sticky mats and rollers, swab-polyester and microfibers, antistatic gloves, static dissipative shoes, cleanroom coveralls, and cleanroom papers. In addition, the company trades in latex products; and distributes cleanroom products. Further, Riverstone Holdings Limited offers healthcare products comprising white, blue, black, and accelerator free nitrile exam gloves. Its products are used in the hard disk drive, semiconductor, and healthcare industries. The company also exports its products in Asia, Europe, and the Americas. Riverstone Holdings Limited was founded in 1989 and is based in Singapore.

Frasers Logistics Trust

Proposed Acquisition of 21 Properties in Germany and the Netherlands Acquisition of predominantly freehold interests in 21 logistics and industrial properties located in Germany and the Netherlands (the “New Properties”), comprising:

 17 properties in Germany

 4 properties in the Netherlands

 Property purchased price : €596.8 million (approximately S$972.8 million)

 Purchase consideration : €316.2 million (approximately S$515.4 million)

Proposed funding for the acquisition comprises:

 A private placement of new units to institutional and other investors; and / or

 A non-renounceable preferential offering of new units to existing unitholders on a pro rata basis; and/ or

 Balance of transaction cost to be funded by borrowings

Focused on primary industries including logistics services, automotive, food logistics and industrial manufacturing.

 Diversified tenant base including multinational companies with investment grade ratings and publicly listed corporations

20 high quality tenants(2) with no single tenant contributing more than 15% of GRI(1)


Transaction Rationale and Highlights

1. Strategic entry into the attractive German and Dutch logistics and industrial markets.Strategic Entry into the Attractive German and Dutch Logistics and Industrial Markets. Key global logistics hub – Germany and the Netherlands ranked #1 and #4 logistics hubs globally(1). Located in heart of Europe with extensive road, motorway and rail  network. Further extension of global reach given critical role in China’s Belt and Road Initiative

2. Prime, strategically located and predominantly freehold portfolio. Stable leases backed by high quality tenants

3. Enlarged and diversified portfolio positioned for long term growth. Reduced concentration risk in the top 10 tenants.

4. Leveraging Sponsor’s integrated development and asset management platform.  FLT is well-positioned for future growth through leveraging on the Sponsor’s widened logistics and industrial platforms in Europe and Australia

5. Consistent with the Manager’s investment strategy. Proposed acquisition is in line with FLT’s key objectives.

Exposure to the attractive German and Dutch logistics markets which serve as the trade gateway to Europe

Comprises prime and predominantly freehold logistics and industrial properties

100% occupied or pre-committed by high quality tenants and long leases

89%(1) leases with CPI-linked indexation or fixed escalations

Reduces concentration risks through geographical diversification and tenant mix

Maintains optimal capital mix and prudent capital management

FLT’S OBJECTIVES Deliver stable and regular distributions to unitholders

Achieve long-term growth in DPU

I think this new acquisition would likely boost their overall portfolio spreading across Australia , Netherlands and Germany that may likely cushion the fall of rental rate for different countries.
Overall this new acquisition would be able to enhance and increase the DPU paying out per unit. Looks positive to me.

Not a call to buy or sell.
Please do you own due diligence.

The 2nd quarter is just released yesterday which saw the overall DPU rises 3.2% to 1.81 cents.

2QFY18 Distributable Income (“DI”) of A$25.9 million, up 3.2% from 2QFY17

 2QFY18 Distribution Per Unit (“DPU”) of 1.81 Singapore cents, up 3.4% from 2QFY17

 Declared distributions of 3.61 Singapore cents for 1HFY18, up 3.4% from 1HFY17

 Three leases renewed/signed  As at 31 March 2018: WALE of 6.75 years and high occupancy of 99.4% maintained

 Reduced near-term expiries in FY2018 and FY2019 by 2.5% and 4.6% respectively

 Gearing of 30.5% with debt headroom of A$531 million as at 31 March 2018  85% of borrowings at fixed interest rates

Ascendas-hTrust

4th quarter results is out , dpu incteinc 25.5% to 1.72 cents due to divestment gain from China property.
If Without this divestment gain, NPI is down 8% to 23.7m.

Together with 3rd quarter dpu of 1.41 c nts ,total 3.13 cents has been declared and XD will be on 16 May.

NAV has also rises from 86 to 92 cents.

Not a call to buy or sell.

The recent acquiring of 98.7% stake in KY-Heritage Hotel Dongdaemun for KRW72.1 billion ($89 million).

 The 215-room four-star hotel sits on a plot of freehold land in Dongdaemun, a major shopping and tourist seems quite well receive by the market.

 The company mentioned that this purchased is dpu accreditative.

 Also in early January , the company has divested two China hotel properties, Beijing Novotel Sanyuan and Ibis Beijing Sanyuan, for a total of RMB 1.16 billion ($235.9 million) in cash.

 With the money gathered from the selling of these 2 hotel properties in China, the company would be able to use part of the proceeds to pay for the new acquistion in Korea. The company may payout some of the gains from this divestment to reward shareholders with a special dividend.

Looking through the Financial results for past few years, the Total Revenue seems to be generally increasing from 214.28m (2013) to 224.43m in 2017.

Net income is not consistence as in 2013 it was generating  16.68m and has been drifted lower to 8.10m in 2017.You may want to look further into the detail for this declining net income figure.

Gearing looks fine which is below 35%.

Cash flow has also been generally declining .

Average dividend of 5.48 cents.
Yield is about 6.5%

NAV of 85.6 cents.

I have roughly workout the fair value using DDM and derive the value of about 87 cents.

The current price of 81.5 cents may still present a potential upwards of about 6.7% to reach 87 cents.

Perhaps, the capital gain might not be that great! I think investor are purely invest for the constant yearly yield of about 6.5%.

Not a call to buy or sell.

Trade/Invest base on your own decision.

Quote : Jeremyowtaip -

1. Recent sale of China hotel properties at good premium to unlock value for unitholders.

2. NAV per share after divestment of China properties is increased thus leading to an attractive P/B ratio below 1.

3. Some possible ways the trust may utilise the divestment proceeds include paying higher distributions or a one-off special distribution seen as a return of capital to unitholders. Also, the trust may utilise the proceeds to pare down debts and decrease gearing. The trust may also utilise the proceeds for AEIs of existing properties and/or for new acquisitions. Or can channel the proceeds into all of the above mentioned with different weightings for each depending on the manager.

My take is that no matter which ways the divestment proceeds are utilised, the manager should provide a sound basis to their unitholders why it chooses certain way to use the proceeds.

For example, if it chooses to do a new acquisition that is not so attractive as compared to previous China hotel properties it has divested paying too high a price for the new property which has less attractiveness. Then, we ask ourselves this question. Why exit the China hotel properties at a premium only to re-enter another new property with less attractive future prospects? This would be doing one good decision followed by one bad decision to negate the previous good effect.

If it chooses to pare down strategically some of the existing debts to increase the average weighted length of time to debt expiry in view of potential rise in interest rates. Maybe this is a good decision.

If it chooses to reward unitholders with higher one-off distributions, it is a neutral option depending how they do it. If most of the proceeds are used towards rewarding unitholders, it may help to boost their unit price higher on a short term basis when a higher distribution attracts investors to this trust. But when the buffett has already ended, what comes after next? Any more growth? If not, then it is just a short term fever with no longer term positive effects of increasing distribution on a one-off basis.

Do not get me wrong. I am not saying rewarding unitholders is always wrong. But overdoing it just to boost up the unit price on a shorter term basis may not be as optimal compared to growing the trust on a long term basis providing sustainable increase in distributions over time. Unitholders will be happy only for a short while with a buffett treat as compared to a trust or REIT which really can sustain their growth in distributable income for a very long time to come giving out better and better treats (which may not be buffett standard but still relatively good standard treats).

In conclusion, AHT has done an impressive job with the divestment of the China hotel properties at good premium gains. Let's see how they use the divestment proceeds. I believe this is more important to watch for than the ongoing price movements of this trust. Of course, if the trust proves it can use the proceeds in a very good and sound way, then buying it at the current price now is good. If otherwise, even if one can supposedly get it cheap at less than P/B ratio of 1, think again is it really a great wonderful catch.

Dyodd

Ascendas Hospitality Trust (“A-HTRUST”) was listed in July 2012 as a stapled group comprising Ascendas Hospitality Real Estate Investment Trust (“A-HREIT”) and Ascendas Hospitality Business Trust (“A-HBT”), established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income-producing real estate used predominantly for hospitality purposes, as well as real estate related assets in connection with the foregoing. The asset portfolio comprises 11 quality hotels with over 4,000 rooms geographically diversified across key cities in Australia, China, Japan and Singapore; and located close proximity to central business districts, business precincts, suburban centres, transportation nodes and iconic tourist landmarks. A-HTRUST is managed by Ascendas Hospitality Fund Management Pte. Ltd., the manager of A-HREIT, and Ascendas Hospitality Trust Management Pte. Ltd., the trustee-manager of A-HBT. A-HTRUST is sponsored by Ascendas Land International Pte Ltd, a wholly-owned subsidiary of Ascendas Pte Ltd.

StarHill Reit

The DpU for 3rd quarter drops 7.6% to 1.09 cents versus 1.18 cents last year.

Looks like retail rental is still facing difficulty in raising their rental rate.

NAV 92 cents.
Price 70 cents
 Estimated annual DPU of 4.4 cents
Yield is about 6.3%

Not a call to buy or sell.
Pls do your own due diligence.

These are my findings for Starhill Global REIT. Starhill Global REIT as they described themselves on their website is a REIT which currently has a portfolio of 11 properties used primarily for retail and office uses.

Their flagship properties are Wisma Atria and Ngee Ann City located in Orchard Road of Singapore. They have grown in their portfolio from their two flagship properties to now total of 11 properties located across KL Malaysia, Chengdu China, Tokyo Japan, Perth and also Adelaide Australia. Thus, they are now diversified into different geographical regions.

For this sharing, I will do a comparison of Starhill Global REIT versus CapitaMall Trust, a very familiar Singapore large retail REIT which is also the first listed REIT in Singapore. Since Starhill Global REIT derives majority of their revenue from retail tenants and less so from office tenants, it is still a reasonable comparison against CapitaMall Trust.

 I will compare their compounded annual growth rates (CAGRs) in three different important metrics over the past 11 years since 2006 to 2017.

 These three important metrics are net property income, distributable income and value of investment properties. The exact period of comparison may differ slightly due to different reporting timings of their full year results. Nevertheless, it is still kept to not more than half a year difference in both their period of comparison.

First, we look at the net property income growth. For CapitaMall Trust, it's net property income has grown at a CAGR of 7.42% over the past 11 years from 2006 to 2017. For Starhill Global, it's net property income has grown at a CAGR of 9.2% over a similar period.

Next, we look at the distributable income growth. For CapitaMall Trust, it's distributable income has grown at a CAGR of 8.02% over the past 11 years. For Starhill Global, it's distributable income has grown at a CAGR of 7.2% over a similar period.

We look now to the value of investment properties growth. For CapitaMall Trust, it's value of investment properties has grown at a CAGR of 6.1% over the past 11 years. For Starhill Global, it's value of investment properties has grown at a CAGR of 7.29% over a similar period.

Just to have some perspective on the size of these two retail REITs currently. The value of investment properties held by CapitalMall Trust as of Dec 17 is around $8.77 billion while the value of investment properties held by Starhill Global REIT is around $3.15 billion. We can see that the latter is less than half the size of the former in terms of the value investment properties held in it's portfolio.

 Thus, we are comparing a much bigger retail REIT player CapitaMall Trust which is focused on a Singapore retail mall market to a smaller global retail REIT player Starhill Global which is diversified across retail mall markets in different geographical regions.

In terms of net property income growth, Starhill Global has delivered close to 2% higher CAGR than CapitaMall Trust over the past 11 years which is significant. In terms of distributable income growth, Starhill Global loses marginally in less than 1% point to CapitaMall Trust in the CAGR of distributable income.

Perhaps CapitaMall Trust is slightly more efficient in growing and managing it's cash available for the purpose of distributions despite producing a slightly lower growth in it's profitability as a retail landlord as compared to Starhill Global.

If we look at the growth in value of investment properties, Starhill Global REIT has been growing at a higher compounded annual rate at about 1% higher than CapitaMall Trust. This is not surprising due to the former which is a smaller retail player as compared to the latter with room to grow faster.

The larger the investment property asset size a REIT owns, the slower growth it will likely experience as it needs to look to acquire more properties and also properties of larger value quantum as it grows larger in order to match it's previous growth rates.

 Also, the value of investment properties may fluctuate at times and properties in different geographical regions may be subjected to different valuations depending on the property market conditions affecting property valuations in the different regions and subsequently the growth in value of investment properties.

A possible question to ask here is how do the valuations and the growth in valuations of retail mall properties in Singapore compare against that in KL Malaysia, Chengdu China, Tokyo Japan and the two places of Australia that Starhill Global REIT has properties in? Is a diversified strategy in this sense better than a Singapore focused strategy?

Other metrics of comparison such as overall occupancy rate and gearing are about similar for both retail REITs at more than 90% and about 30 plus % respectively. Thus on an overall basis, Starhill Global REIT a geographically diversified retail REIT player compares favourably to CapitaMall Trust a large established retail REIT based in Singapore.

Starhill Global REIT is currently trading at $0.72 and has a $0.91 NAV per unit and a distribution yield of about 5.99%. CapitaMall Trust is currently trading at $1.98 and has NAV per unit of $1.92 and distribution yield of about 5.64%. It seems that Starhill Global REIT is currently trading at a cheaper valuation versus CapitaMall Trust even though both are comparable in terms of their growth performance on net property income, distributable income and value of investment properties over the past 11 years.

Hi Sporeshare, I attached below a link to the Straits Times article which summarises what are the current developments in Starhill Global REIT which caused their overall drop in gross revenue, net property income and DPU for most recent performance.

The reasons given were due to:
1. the effects of straight-line rental adjustments.
2. higher withholding taxes for Malaysia and Australia properties.
3. weaker contributions from offices.
4. disruption of income from ongoing asset redevelopment works at Plaza Arcade in Perth.
5. lower revenue at Myer Centre Adelaide Australia.

The CEO of Starhill Global REIT commented that their Singapore retail portfolio has remained stable while new take-ups for office space were encouraging.

Also, the asset redevelopment works on Plaza Arcade and Lot 10 will likely be completed this first quarter meaning for the rest of this year, these two properties can start to contribute to revenue and net property income etc. again.

The chairman of Starhill Global REIT also made similar comment that earlier initiatives to rejuvenate the portfolio has been timely and the REIT will be in a good position to ride any retail sector upturn.

If we look at the reasons given for the recent few quarters weaker results and the replies by the CEO and Chairman, we should ask a question. Do these guys know what they are doing and are what the various actions they are carrying out currently for this REIT and unitholders make sense to grow the distributions for the long term?

As far as I can observe, some factors were not within their control to be fair to the management. Things like straight line rental adjustments and higher withholding taxes on Malaysia and Australia properties. This maybe one of the thing to look out for when investing in overseas properties. If Singapore has a comparatively lower tax on retail properties, then perhaps a Singapore focused retail property portfolio maybe better.

But then again, there maybe certain tailwinds found in overseas retail mall markets which may not be present in Singapore especially if the growth element in retail mall market in our saturated tiny red dot is going to be limited going forward.

The CEO commented recent new office take ups were encouraging. Also, both CEO and Chairman thinks that sacrificing a few quarters of lower net property income and DPU to redevelop their Australian assets at this timely moment will ensure the assets there can capture the ride in retail sector upturn.

Thus, I think it is only fair to give the REIT another few more quarters to see whether there is any improvement in their metrics such as gross revenue, net property income, distributable income and DPU. This will tell us whether what the management is doing currently really is of good foresight in terms of future benefits for the unitholders. Next few quarters, there are no more excuses such as asset redevelopment works affecting their performance.

 Let's see whether their performance picks up from here going forward in order to make a fair opinion on them. As of now, the various reasons given are reasonable in my opinion to explain why their various metrics are performing weaker.

Straits Times article Business section: Starhill Global Reit's DPU down in Q2 

http://www.straitstimes.com/business/starhill-global-reits-dpu-down-in-q2

To ride on the return to better profitability going forward......Let me also do a comparison against Suntec REIT to see how Suntec REIT pits against both CapitaMall Trust and Starhill Global REIT for the past 11 years. Then there is also Mapletree Commercial Trust also another touted good performer which is also a retail-office hybrid landlord to compare against. I am getting quite excited here.

I have tabulated Suntec REIT and Mapletree Commercial Trust's (MCT) growth performance to compare against Starhill Global REIT and CapitaMall Trust (CMT). However, for MCT, it was only listed from April 2011 onwards. As such, I have taken only the period from 2012 to 2017, a five year period of growth for MCT to compare against the rest.

Net property income CAGR for 11 years (5 years for MCT)
CMT = 7.42%
Starhill Global = 9.2%
Suntec REIT = 6.23%
MCT = 18.7%

Distributable income CAGR for 11 years (5 years for MCT)
CMT = 8.02%
Starhill Global = 7.2%
Suntec REIT = 9.71%
MCT = 25.5%

Value of investment properties CAGR for 11 years (5 years for MCT)
CMT = 6.1%
Starhill Global = 7.29%
Suntec REIT = 9.87%
MCT = 16.56%

The current gearings for these four REITs are quite close hovering around 35% plus minus 1 to 2 % points. Thus, they are financially geared about similar levels currently after rendering their respective historical CAGR growths in the past period considered.

If we ignore the duration of period considered, clearly the winner here is Mapletree Commercial Trust (MCT). But, it would not be a fair comparison since the period considered for MCT is only most recent 5 years which the retail and office markets long way back and recent 5 years may have seen changes thus affecting the growth rates at different periods in time.

The big question is whether going forward can MCT continue to grow at current CAGR? This is because the property asset size of MCT is also by no means smaller than some of the rest in this comparison. Thus, to give it some fairness even if the period of growth considered is only recent 5 years, it really has made impressive double digits CAGRs on it's various metrics on a large property asset base.

Suntec REIT seems also quite good in terms of growing it's distributable income and value of investment properties at close to 10% CAGR over the past 11 years winning over Starhill Global REIT and CMT by a large margin. The only thing is that the net property income CAGR for Suntec REIT loses out to the latter two despite having grown faster in it's distributable income and value of investment properties.

Perhaps, it is worth investigating further for interest why Suntec REIT did not grow it's net property income at higher CAGR over the past 11 years? Is it a matter of difficulty in keeping property expenses low? Is it the gross revenue are not growing as fast due to generally lower rental income rates on it's properties over the years?

In conclusion, I see Mapletree Commercial Trust as experiencing strong growths in net property income, distributable income and the value of their investment properties even though their growth considered is only most recent 5 years. If it can continue at current or close to current CAGR for these various metrics over next few years, it may really become a clear winner in this segment of retail-office landlord space. Starhill Global REIT may not be a stark winner against it's peers in this comparison. However, it is definitely also not a loser trailing behind it's peers in terms of growth performance.

My picks as follows according to their growth performance.
1st = MCT
2nd= Suntec REIT
3rd (tie up) = Starhill Global REIT and CMT

Reasoning as follows: I like MCT for it's current high growth rate. I look forward to it's future developments whether it can continue to maintain the current high growth rate from it's future growth strategies. If it can do so, this is really one of the best performer in this retail-office landlord space.

Suntec REIT I like how it has rewarded unitholders well over time in terms of it's high growth rate in distributable income and growing it's property asset base through itself and also forming joint ventures with others. The only thing I would wish they could improve upon is to grow their net property income in step with their overall growth. If I am considering Suntec REIT, I will watch their future net property income closely for signs that they are growing their rental income on their properties well and also managing their property expenses more efficiently.

Starhill Global and CMT are lagging slightly behind the above two picks. If their growth going forward can be more exciting with their ongoing growth strategies, then I will upgrade my opinion on either or both of them to be on par or higher than MCT or Suntec REIT.

These are the unit price, NAV per unit and distribution yield for these four comparisons currently.

Unit price vs (NAV per unit)
MCT = $1.56 vs ($1.37)
Suntec REIT = $1.92 vs ($2.119)
Starhill Global REIT = $0.72 vs ($0.91)

CMT = $2 vs ($1.92)

Distribution yield
MCT = 5.77% (annualised based on 9M results)
Suntec REIT = 5.21%
Starhill Global REIT = 5.99% (annualised based on 1H results)
CMT = 5.64%

In terms of trading at cheap valuations, this is the ranking I give based on unit price vs NAV per unit and also their current distribution yield.

1st = Starhill Global REIT
2nd (tie up) = Suntec REIT and CMT
3rd = MCT

This proves the point that good things do not come cheap. MCT may rank as best growth performer in it's various important metrics considered earlier, it also comes with a not so cheap price tag. But, a thing worth considering is that if MCT can continue to grow at current growth rates, perhaps at an annualised distribution yield of 5.77% is still worth some nibbling.

If a bear market should come soon, at least one will now know which are the strong growth performers that can be snapped up at a rare discounted price. There are certainly more REITs to compare against these few whether in similar retail-office landlord sector or other REIT sectors and I am sure this is not the end to the comparison in this REIT universe as one may just be surprised that there maybe even better performers out there than MCT.

PS: I will hope a bear market comes soon and then shopping for REITs will be a real bargain as discounts will be everywhere even for excellent REITs. My target buy-in prices will be the lower the better for these few REITs mentioned. {

jeremyowtaip}

some exchange discussion:

Gearing ratio is average relative to other similar players. Though I don't like to see it go up to max 45%.

But of cos if it's needed, they could still gear up for acquisition or even raise rights for funding, happy to participate as long as its yield lucrative.

To me most impt is the reit manager, a strong track records are impt.

To buy a retail reits under 1x PB is hard to find in current market environment and of course we cannot compare to capital mall reits, investor pay a premium for them.

For me buy a below 1x PB is always nice to have with a 5-6% yield.

Yup! For REITs, we look at their gearing. The allowed limit REITs can geared up to by MAS ruling is maximum 45% for credit rated REITs and 35% for non-credit rated REITs. Gearing is calculated by taking the total borrowings divided by total assets expressed as a %. These gearing limits have been revised to current allowed limit. It used to be even higher in the past. Thus, a lower gearing limit ensures REITs maintain a safe reasonable debt level and do not over leverage excessively which can be risky.

For Starhill Global REIT, it's gearing is currently close to 35% which is comparable to many REITs in Singapore too. There are some REITs with even lower gearing but around 30% to 40% is where you will find most REITs tend to maintain their gearings.

35.3 % gearing is normal. Other reits as high as Kepple Reit 38.7%, Viva Trust 39.8%, Soilbuild Reit 40.6%, MLT 37.8% etc..