Cory Diary : Where are we now on Reits ?

Many of our quality local Reits are now in the range of 4%-5% yield. This is still much better than keeping the money in the banks enjoying miserable returns. One could say that well the stock price can fluctuates therefore potential for capital loss. However this is true if we trying to time our capital returns through trading and not about investing in the business.

When we look into our investment holistically, is a businesses that provides us returns in addition to recovering markets from Covid Impacts. Therefore chances are we will also have capital gains in near to mid terms. However such gains are in the mercy of the market sentiments and macro conditions. If one is to own a business, does it really matter whether how the auditor value your NTA (Stock price) or the criteria should be how much cash flow it is generating into your "CEO" pocket.

On this perspective, a well established business, can provide constant positive returns way above bank saving, fixed deposits or even CPF interests rate. The key measure will be sustainability of the business, growth and income. What if we continue to wait it out. The risk is lowering rates and therefore lower yields. Every quarter or half yearly reit investors still receive the dpu in which the returns could be buffered up for further compounding against market direction.

For the more savvy reit investors, we could look into Reits dominant in oversea markets denominated in US, Euro or Pounds. This Reits are views more risky due to currency, foreign market condition,  regulations and signs. Why "Signs". EHT has taught investors a big lesson on how screwed up it can be and that just looking at yield is a recipe for disaster. Taking a rear mirror view, a young unknown mgmt team, major shareholder selling, a depleted ship, poor travel reviews on its hotels, ....

We can go further on with Sabana, Lippo or First Reit. That we need to monitor our investments on what Sponsor or Management do. Sometimes integrity go a long way than just initial years of good returns track record. It can be their long fishing line too. Don't be their fish ! Always be prepared to Cut loss.

Now I look at the few riskier reits using Elite Com as an example. Elite - Con - old builds, limited contracts. Pro - Has started paying dividends. Government tenants. Premium rights issue. Weighted the Pro and Con. Based on current information, I could put some. This will help push up the portfolio yield a bit. And that's the bit we need. However don't be a sleeping investor. We have quite a number of screwed cases. Do our Maths. Close scrutiny on the management and sponsor. Track records. Be less forgiving.

Final note, look at Reit as a Simple to understand Business you would like to own for long term, and chances are we will do well in the investing journey.

Cory

2021-0416

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.