im wondering what's the most optimal method to value REIT?
is it DDM? if yes what would be the proper discount rate? (i estimate it to be ~8% -> disc rate = div yield (~5.8%) + growth rate (~2%))
or DCF? if yes what cash flow should we project (funds available for distr/ net income/ taxable income/ net prop income?) and again what is the WACC?
thanks si fu!!
(08-11-2013, 08:02 PM)rickytj Wrote: [ -> ]im wondering what's the most optimal method to value REIT?
is it DDM? if yes what would be the proper discount rate? (i estimate it to be ~8% -> disc rate = div yield (~5.8%) + growth rate (~2%))
or DCF? if yes what cash flow should we project (funds available for distr/ net income/ taxable income/ net prop income?) and again what is the WACC?
thanks si fu!!
Given the dead silence response for past three days, we can safely conclude (i) it's a complex question to answer, (ii) we have a bunch of valuebuddies who are very humble (see lar, u mention sifu and nobody dares to reply. haha!)
I am definitely no sifu as well. In the wide spectrum of newbies and sifus, I am probably standing where you are (or further back) in the queue.
There is a good thread on
REIT valuation already. You may want to visit it.
Drizzt also wrote a good piece on
REIT valuation previously.
The subjective elements within discount rate & WACC make DDM or DCF more useful as a rough gauge than a definitive figure to base your buy / sell decisions on.
The "art" of it - the defensiveness of the underlying business, the potential forward-looking credit risks, whether the NAV is supported by upward revaluation of properties that is of a more permanent nature or just paper play. A turn of interest rates / economic downturn can equally drive down asset values, in turn triggering debt recalls (and affect ability to pay distributions). Can the REIT continue to deliver the promises under a worst case scenario? All these need to be pondered.
A quant who can only do financial modelling is less paid than an actuary who can monitor and analyse the macro, appropriately change the key variables to the model and come up with the best pricing.
Use the quantitative techniques with care my friend. Marry it with qualitative thoughts.
(11-11-2013, 10:59 AM)FatBoi Wrote: [ -> ]A quant who can only do financial modelling is less paid than an actuary who can monitor and analyse the macro, appropriately change the key variables to the model and come up with the best pricing.
Use the quantitative techniques with care my friend. Marry it with qualitative thoughts.
A quant can only do as well as the data he's given and the assumptions that are made about the data and the suitability of the model. Typically, most quants are deployed in banks to ensure that the products that are traded in a bank are priced in a fair way (meaning consistent with with the market). A quant cannot foretell the future.
To answer the poster's questions. About the only useful advice I have ever seen that is consistently appealing is Buffet's rules #1 and #2.
Be skeptical but not paranoid.
At the end of the day, investment is a practice oriented course. And you need to be prepared to lose money to learn how not to lose money. Pick a method (any reasonable looking method), and try.
Surprising first foray for Suntec into Australia. I think it is a stiff price for a North Sydney asset. But good for ARA as AUM of Suntec goes up by about A$400 mil.
(14-11-2013, 09:19 AM)newyorkcityboy Wrote: [ -> ]Surprising first foray for Suntec into Australia. I think it is a stiff price for a North Sydney asset. But good for ARA as AUM of Suntec goes up by about A$400 mil.
Weird that this major news is not reported on SGX website or the Suntec REIT website......
Is the acquisition confirmed?
(15-11-2013, 06:51 AM)FatBoi Wrote: [ -> ]Is this the property in question?
http://www.leightonproperties.com.au/our...ghway.html
It is only expected to be completed by 2016.
looks like it from the following link. Straits Trading Building next?
http://www2.smartbrief.com/news/nareit/s...ief=nareit
Suntec REIT to buy Australian tower in $372M deal
Singapore-listed Suntec REIT is acquiring a tower under construction in North Sydney, Australia, in a deal worth $372 million. It is part of a wave of Singapore-listed REITs that have been scooping up assets Down Under.
It seems that investors are sceptical on this purchase, judging from the decline in its share price.