Hi Folks, it has been a crazy past 2 weeks with the weakening of the US Market and also our local SREITs. Back on 19th September 2024, I have discussed in my previous post that despite the jumbo 0.5% rate cut by Powell, the strong rally in SREITs maybe overdone as the distribution yield of blue chips like Mapletree Industrial Trust ("MIT") dropping to close to only 5% yield at its highest point during the REIT rally. Stronger than expected US payroll statistics also led to various market concern that inflationary pressure will be back and it is still too early to step off the accelerator for rate hikes. Even with the slight correction yesterday, I think that most SREITs are still over-valued as we cannot expect interest rates to be at near zero like the past decade.
1. SREITs That I Will Still Buy
Seriously, I really cannot find any good buys for the top blue-chip REITs from the trio Mapletree, CapitaLand and Keppel families. Look at MIT or Keppel DC REIT, will you still dare to go in to accumulate additional units at the current pricing?
If I have any additional resources and forced to buy something, I will probably add on to United Hampshire US REIT ("UHREIT") as its price has once again tapered off and giving out a 8.8% distribution yield as at 8th October 2024. However, since this is one of my top holdings, I am already overly-concentrated in UHREIT and will have to give this very attractive SREIT a miss.
2. Overseas REITs That Is Still Worth Buying.
I thought that Link REIT ("LREIT") listed on the Hong Kong Stock Exchange ("HKEX") is a very undervalued counter. LREIT used to be linked to the Hong Kong Government and has interesting properties mainly based in Hong Kong and China. My Hong Kong work colleagues have been mentioning this to me. Same for Master Leong YouTube channel which he has also shared as a value for money buy. Its leverage ratio is at an enviable 20% resulting from a rights issue at HKD 44 per unit in March 2023.
I accumulated around 6,200 units of LREIT from May 2024 to July 2024 at an average price of HKD 32.2 per unit since I am getting these units at a big discount to what those rights issue holder paid in 2023. For me, any purchase that is below HKD 44 per unit is not a bad deal. It is currently giving out a distribution yield of 6.96% along with potential for capital growth.
3. Other Interesting Dividend Counters
I thought that Ping An is an interesting recommendation on various media such as Master Leong as aforesaid mentioned. Ping An price has dropped from HKD70+ to a pathetic HKD30 range due to the belief that the China Communist Party will force Ping An to do national service and recuse one of the Property Development firm. I have been adding Ping An (5,000 shares) from Jan 2024 to Sep 2024 at an average price of HKD 34 per share. Its distribution yield was previously hovering near 8% which was too attractive for me. However, with the current market pricing which lowers the yield to only 5.25%, I maybe selling it off to accumulate other investments if suitable opportunities such as if our local SREITs underwent further price correction.
Parting thoughts
I do hope that the China and HK markets continue with their revival as they have been in a bear territory for many years and hopefully produce outstanding capital growth on top of dividends distribution. Strangely, picking undervalued good dividend paying companies in China/HK has turned up to be a good decision with a stroke of good luck in recent week- I certainly did not expect the sudden capital appreciation in just one week.
