In part four of this 6-part series, we shift our focus towards REITs that still exhibit room for growth in the upcoming quarters via expansion opportunities. Here are two REITs that you want to keep in your watchlist if you are a growth investor.
Investors Takeaway: 2 REITs Growth Investors Would Love
RHB initiated its first coverage of ESR-REIT this quarter with a BUY recommendation. According to RHB, ESR-REIT is on a transformational path ever since ESR Group became its sponsor. Right now, ESR-REIT is a pure play on the Singapore industrial sector turnaround with a well-diversified portfolio of 57 assets located across the island. RHB believes that the market has yet to recognize the full potential of the economies of scale from its growth and sponsor strength as it trades at an attractive FY19F yield of eight percent.
After a rapid expansion via inorganic growth over the last two years, the manager has stated that it will focus more on organic growth in the next two years. Seven properties were identified for AEI over the next three years as it taps on the unutilized GFA of 1 million sqf. Right now, ESR-REIT is trading as the cheapest Singapore-focused industrial REIT in the market.
BUY, TP $0.61, REIT Report Card Rating: B+
- EC World REIT
Sponsored by China-based property group Forchn Group and through its recent strategic initiative with leading logistics operator, YCH Group, EC World REIT is anchored by stable leases and offer investors with above average yields of at least eight percent.
The e-commerce boom in China has provided a structural support for the development of quality warehouses to cater specifically to the storage and distribution of merchandise. EC World REIT is among the few providers that offer such quality warehouses and logistics facilities. Given the significant shortfall in supply, this bodes well for EC World REIT as it looks to scale its e-commerce business.
While the successful extension of its master lease at end-2020 is a key overhang on the stock, DBS believes that the risk-to-reward ratio is now making it favourable for investors.
BUY, TP $0.86, REIT Report Card Rating: B+
REIT 4Q18 Report Card: 3 REITs That Investors Will Rue Missing Out On