It feels like some time since I talked about this stock of mine that takes up a large portion of the portfolio. REIT are as such, when there are no capital events, they do ok. Last year we learnt what rising interest rates can do to investors confidence on REITs.
Given the choice now that I am more matured, I would steer clear from them. I would still like them when they are beaten down to an irrational levels.
First REIT was the most exposed REIT last year when I did a review of which reits have the highest exposure to floating rates. Since then they have taken steps to push more to fixed income. Always nice to be prudent.
One of the main reasons to like this REIT was the long lease tenure, and another is that they used to be so conservatively geared. Its nice to see that they are aiming for not exceeding 30%. Though I think, to achieve this, what they are banking on are asset values to go up to make it seem “conservative”
The interesting part is an expansion of existing facilities. This will improve yield and perhaps more optimized versus acquisition. The question is where will financing come from. Perhaps they will leverage up, perhaps it will be internally funded. Perhaps it doesn’t cost as much.
First REIT is one of the yield stock found on my Dividend Stock Tracker. Check out the rest of the yield stocks here.
Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
Readers also follow Kyith to learn how to plan well for Financial Security and Financial Independence.
Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
You can view Kyith's current portfolio here, which uses his Free Google Stock Portfolio Tracker.
His investment broker of choice is Interactive Brokers, which allows him to invest in securities from different exchanges all over the world, at very low commission rates, without custodian fees, near spot currency rates.
You can read more about Kyith here.
- New 6-Month Singapore T-Bill Yield in Late-April 2024 to Drop to 3.70% (for the Singaporean Savers) - April 18, 2024
- Golden Nuggets from JPMorgan Guide to Retirement 2024. - April 16, 2024
- Be Less Reliant on Banks and Build Stronger Capital Markets by Pushing for Better Shareholder Dividend and Buyback Yield - April 14, 2024
LP
Friday 18th of July 2014
It's HOW short end rates are raised, and whether there is sufficient time for the market to price it in. Yield sensitive instrument already took a battering. The rate hike should be priced in already. If anything, the belly of the fixed income curve should get hit the hardest. The long end, where REITs sit, unlikely to get hammered too badly.
In addition, rising discount rates usually signal a decent economy, which should be decent for REITs which have good economic exposure.
Kyith
Saturday 19th of July 2014
Hi LP, you raise some good counter points. But to counter that, the growth have been based on easy credit, and in that absence, or rather when that is more expensive, acquisition will have to come from other sources.
When discount rates rises, the hurdle increases and there is just so much rental the hospitals will yield Lippo will not want to pay through the roof for that in their expenses.
I wonder what is priced in. suspect the fear is priced in but it does proof a tough envrionment.
even at high rates in the 1970s the US REITs did rather well as well.
steven
Wednesday 16th of July 2014
erm.... for some reason the image is not shown recently. seems source issue?