Soilbuild Reit into Portfolio
Recently I bought 10 lot of Soilbuild Reit at a price of $0.705.
As my warchest gets larger, I started scouting for opportunity again. I was considering either to add my position in Fraser Centrepoint Trust ( FCT ), selling options in the US market or adding Soilbuild Reit.
I decided upon adding Soilbuild Reit instead of the other 2 because compared to US market, I am more familiar with the local exchange, hence US market is considered riskier, I wanted to increase my exposure to the local market first before I inject another portion of my warchest into selling option.
Personally, I like Fraser Centrepoint Trust a lot due to its shopping center and low gearing. However, I chose to add Soilbuild Reit instead as I wanted to diversify my portfolio more plus its dividend yield is pretty lucrative now.
I understand that some people might think that my portfolio is too concentrated because no matter what Reits, they somehow belong to the same category. I do agree to certain extend, however based on Singapore context, with the lack of space, increasing population, I felt that you won’t go wrong with Reits.
Firstly, after accessing Soilbuild Reit against my own checklist, Soilbuild Reit fared pretty decent.
Secondly, more companies are shifting their business from CBD area to business park for cheaper rental and they still serve the same purpose to them.
Thirdly, their sponsor have vast interest in them. In addition, majority of their management have keen interest in the Reit as well.
If you also realized, Mr Lim Chap Huat units have been increasing since 2013. With this above, it gives me more confidence in the Reit as well as towards the management.
Inspired by a fellow financial blogger (Invest Openly), I decided to do a comparison as well with one of the bigger industry Reit. I find that by coming up with this table, it makes the information much easier to digest and hopefully it does help you as well. I removed some criteria and added some other criteria in that I feel is important to me.
You may be puzzled, by 1 look AIMS AMP Cap Reit seem to be the winner, why do i still buy Soilbuild Reit instead.
Let me try to break this down for you. Personally, I added in some of the criteria to compare and have a understanding how diversified the Reit is. E.g AIMS AMP Cap Reit have 26 properties while Soilbuild Reit only have 11, which also means that any drop in 1 tenant will not affect the overall performance as much as compared to Soilbuild Reit.
This is to have a rough idea how both Reit stand against each other.
In terms of Price to Book Ratio, Soilbuild Reit is currently trading at a better value.
In terms of Dividend Yield, Soilbuild Reit yield of 9.2% currently is quite lucrative to me.
In terms of Gearing, I personally felt that 36% is a bit on the high side but given the fact that this reit is new and expanding, it will need to take on more debt to do acquisition.
In terms of Portfolio Occupancy, Soilbuild Reit fared better than its peer which gives me more confidence about the management team in securing new tenants and renewing existing tenant contract, however we must still take into consideration that AIMS AMP Cap Reit have much more properties and hence on the hindsight, might be harder to manage.
Interest Coverage is about the same but if you look at the Average Lease Expiry and Average Debt Maturity, you can see that Soilbuild Reit actually fared much better. This is 2 of the more important factor to me personally as I know the Reit will be more stable with the expiry and maturity further away.
Average Land Lease Expiry is also about the same hence i won’t be touching on it.
Return of Asset, Return of Equity and Return of Invested Capital, personally I think that AIMS AMP Cap Reit fare better because they bought their properties at a much cheaper price back then and with the rental revision upwards, the ROA will be better but this is based on my analyze, might not be true also.
Top 3 Dislike about this Reit.
1. High Gearing
2. Industry Reit (Not as familiar as Retail Reit)
3. Complicated Process (Premium Upfront, Short Lease from JTC & etc ...)
This is my top 3 dislike about this Reit. However, with mitigating factor like buying this Reit at a cheaper value than its NAV, based on the broader view of how Singapore is moving, plus the serious land restriction. I am still pretty confidence in this Reit.
All in all, the above is based on the research i have done on Soilbuild Reit. I tried my best to be as detailed as possible but bear with me if I miss out some stuffs.
Please make your own judgement as well before buying into any share.
