Top 3 REITs On Huge Discounts Right Now


Singapore's stock market for blue-chip stocks such as banks and REITs have almost returned to all-time lows in March recently. This fall in share price can be attributed to two things mainly: the poor performance of the US market recently due to the presidential election creating uncertainty among investors and the increase in COVID-19 (Secon/Third-wave) cases in Europe and the United States. As a result, many blue-chip REITs and banks in Singapore's stock market share prices have plummeted as well due to the general negative market sentiment. However, nothing fundamentally significant has changed with these stocks. This means that these blue-chip REITs business models are still extremely stable and relatively low risk. This creates many opportunities for investors to acquire these blue-chip REITs at a massive discount at their current prices. Here are my top 3 REITs that are on huge discounts currently. 


1. CapitaMall Trust (Blue-Chip)

CapitaMall Trust is currently trading at $1.73 per share, close to its all-time low of $1.52-$1.6 during March at the start of the COVID-19 outbreak. It is currently trading at a price to book ratio of 0.86, making it undervalued at its current share price. CapitaMall Trust is one of Singapore's oldest and largest retail REITs. They have an extremely long dividend history and has been consistently paying out dividends to shareholders for 18 years. They are strongly sponsored by CapitaLand Limited and they have a portfolio that consists of 15 properties in Singapore with an extensive tenant network that consists of more than 3000 tenants. CapitaMall Trust has a strong balance sheet and has prudent capital management with a well-staggered debt maturity profile. It is an extremely stable blue-chip REIT to own for the long term and is at a massive discount at its current price. CapitaMall has an average target price of $2.395 ($2.4 by DBS and $2.39 by OCBC). This gives it a potential capital appreciation of 38% in the long run. 


2. Ascendas REIT (Blue-Chip)

Ascendas REIT is currently trading at $2.88 per share, close to its share price of $2.52 in April during the start of the COVID-19 outbreak. Ascendas REIT is one of Singapore's most popular industrial REITs among investors known for its high-quality dividends and great capital appreciation over the years. They also have an 18-year dividend history and has been paying out dividends to investors regularly without fail. Ascendas REIT's portfolio consists of 198 properties across 4 countries (Singapore, United Kingdom, United States, and Australia) with a total valuation of $12 billion+. They have an extensive tenant base which makes them extra resilient during tough economic times such as the current COVID-19 pandemic. Industrial REITs have proved resilient and strong during this COVID-19 pandemic and Ascendas REIT is no exception. Ascendas REIT's balance sheet is also extremely strong with total assets outweighing total liabilities significantly and the management has a reputation of prudent capital management with debt payments arranged appropriately for the REIT. Ascendas REIT has an average target price of $3.76 ($4 by DBS and $3.52 by OCBC). This gives it a potential capital appreciation of 30% in the future at its current share price. 


3. Mapletree North Asia Commercial Trust 

Mapletree NAC Trust may not be a blue-chip REIT but I feel it is worth including in my top 3 due to how massively undervalued it is. Mapletree NAC Trust has been a dark horse among its fellow retail/commercial REITs for some time these past few years.  Mapletree NAC's Trust is currently trading at $0.87 per share, not yet close to its all-time low of $0.7 in March but close to its share price of $0.815 in May. It is currently trading at a price to book ratio of 0.62, making it massively undervalued at its current share price. Mapletree NAC Trust has an 8-year dividend history and they have been paying out dividends regularly since their listing on the Singapore stock market. Mapletree NAC Trust consists of properties in China, Hong Kong, and Japan (recent purchase in 2020) with a total valuation of $8.3 billion and an extensive network of tenants. Mapletree NAC Trust properties have been bouncing back strongly after COVID-19 has been largely contained in China, Hong Kong, and Japan. Mapletree NAC Trust's dividends have always been of high-quality and its distribution per unit over the years has mostly been more than most of its fellow REITs yet sustainable at the same time.  Moreover, its management has shown prudent capital management and actively acquired more properties over the years to make Mapletree NAC Trust one of the biggest retail/commercial REITs in Singapore currently. Mapletree NAC Trust's average target price is $1.07 ($1.05 by DBS and $1.09 by OCBC). This gives it a potential capital appreciation of 23% at its current share price in the long run. 

If you purchase Mapletree NAC Trust for $0.875 per share before its ex-dividend date on 5 Nov, you will be receiving 3.28% (0.02876 cents per security) in dividend payouts on 28 Dec. This shows how severely undervalued Mapletree NAC Trust is at its current share price. 

Verdict

In my opinion, these are my top 3 REITs that are currently undervalued in the stock market. It is worth noting that there is fundamentally nothing significantly wrong with these REITs. It is merely the general negative market sentiment that has caused their share prices to plummet recently. Personally, I have helped my parents purchased some of these 3 REITs using their Supplementary Retirement Scheme (SRS) account and also advised some of my friends to stock up on these mega-discounted REITs. What are some other REITs that you feel are currently massively undervalued?

Be fearful when others are greedy. Be greedy when others are fearful. -Warren Buffett

Comments

  1. Not the time to buy stocks. Cheap can go cheaper.
    Chartwise is showing more fall cud come for some high value Reits. With US mkts remaining high & due for major correction.
    Patience is the key to all stocks buying.

    ReplyDelete
    Replies
    1. Hi, that's a fair and valid point. Personally, I prefer fundamental analysis for REITs vs technical analysis as my game plan for dividend investors is to get high-quality dividend stocks and hold for the long run. The market is definitely extremely volatile now given the increasing number of COVID-19 cases in US and Europe + the upcoming US presidential elections. However, I feel that this does not change the fact that these REITs are really trading at a massive bargain (way undervalued) now for dividend investors. What are your thoughts on the short and long term effects of COVID/US presidential elections on the stock market in the future? Will there be another stock market collapse such as 08's financial crisis or will the US feds approve yet another stimulus to prevent such a situation from happening again?

      Delete
  2. Cmt just merged with cct. Are u sure current price of $1.73 will hold

    ReplyDelete
    Replies
    1. Hi, I am confident that the price of $1.73 will hold as the proposed merger deal between CMT and CCT is going to allocate unitholders of CapitaLand Commercial Trust 0.72 new units of CapitaLand Mall Trust (worth around S$1.86 based on a unit price of S$2.59) together with S$0.259 in cash. The only downside to this proposed deal would be the increased debt gearing ratio of the combined mega REIT to 38.3%. In my opinion, this mega REIT will definitely be well worth it in the long run at its current price of $1.73. What are your thoughts on the proposed merger?

      Delete

Post a comment

Popular posts from this blog

4 Reasons Why Mapletree NAC Trust Is A Good Buy

Singapore's Next Hot Dividend Stock?