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16-03-2013, 07:43 AM
The Straits Times
www.straitstimes.com
Published on Mar 16, 2013
PLAY OF THE WEEK
The frenzy evoked by Reits
Mapletree's trust up 14% since listing; SPH share price soars on news of possible Reit
By Goh Eng Yeow Senior correspondent
INVESTORS have not taken their eyes off Mapletree Greater China Commercial Trust (MGCCT) since it made its debut on the Singapore Exchange (SGX) more than a week ago.
Buying interest in the newly listed real estate investment trust (Reit) was so buoyant that an average 28.1 million units were traded daily during the week.
It closed at $1.06 yesterday, up a further 0.95 per cent for the week. The Reit is now up 14 per cent from its issue price of 93 cents since it started trading on March 7.
Reits are "closed-end" funds that operate in a similar manner to unit trusts. But unlike unit trusts, which invest in shares, Reits specialise in income-generating real estate assets such as shopping malls, offices and industrial buildings.
What makes them so popular is their relatively high dividend payout, since they are obliged to declare at least 90 per cent of their income as dividends to qualify for tax breaks.
Another attraction is their tax-efficient structure, since Reits do not pay income tax at the corporate level; individual investors, too, are exempt from paying any taxes on the dividend income received.
That makes them a much-sought after investment in the current low-interest rate environment, with banks paying next-to-nothing returns for savings deposits.
As a gauge of how hard-up investors are for high-yielding defensive plays, MGCCT's retail tranche of 215.1 million units was 8.9 times subscribed, while the institutional tranche, which made up two-thirds of the offer, was 38.1 times subscribed.
So it was not surprising to find investors cheering after Singapore Press Holdings (SPH) said it was mulling over the setting up of an SGX-listed Reit.
In their stampede to get a slice of SPH, they drove the media group's share price to a five-year high; it gained 35 cents, or 8.39 per cent, for the week to end at $4.52 yesterday.
SPH's announcement sent analysts into overdrive, working out the benefits it might derive from such a spin-off.
OCBC Investment Research analyst Eli Lee said SPH may inject two malls - Paragon and Clementi Mall - into the proposed Reit, with a third, Seletar Mall, positioned as a pipeline asset.
"Assuming that SPH retains a 51 per cent stake in the Reit, we estimate potential divestment gains of $625 million to $744 million," she added, as she hoisted SPH's target price up to $4.94.
UOB Kay Hian analyst Nancy Wei said the real boost to the media giant's share price "would be a large special dividend as SPH could reap cash proceeds of up to $1.46 billion if its stake in the Reit is reduced to 30 per cent".
She anticipated the new Reit to have a market cap of $2.087 billion upon listing.
Similarly, DBS Vickers analyst Andy Sim, who raised his target price for SPH to $4.79, noted that the establishment of a Reit would be a "trigger for share price outperformance and unlocking value for shareholders".
But it is not just Singapore where investors are falling madly in love with Reit initial public offerings.
Over in Hong Kong, there is a strong demand for defensive Reit plays as well. This has lured the city's developers into trying to monetise part of their property portfolios.
Hong Kong-listed New World Developments, for example, said over a week ago that it is considering the possibility of a separate listing for certain of its hospitality assets.
engyeow@sph.com.sg
www.straitstimes.com
Published on Mar 16, 2013
PLAY OF THE WEEK
The frenzy evoked by Reits
Mapletree's trust up 14% since listing; SPH share price soars on news of possible Reit
By Goh Eng Yeow Senior correspondent
INVESTORS have not taken their eyes off Mapletree Greater China Commercial Trust (MGCCT) since it made its debut on the Singapore Exchange (SGX) more than a week ago.
Buying interest in the newly listed real estate investment trust (Reit) was so buoyant that an average 28.1 million units were traded daily during the week.
It closed at $1.06 yesterday, up a further 0.95 per cent for the week. The Reit is now up 14 per cent from its issue price of 93 cents since it started trading on March 7.
Reits are "closed-end" funds that operate in a similar manner to unit trusts. But unlike unit trusts, which invest in shares, Reits specialise in income-generating real estate assets such as shopping malls, offices and industrial buildings.
What makes them so popular is their relatively high dividend payout, since they are obliged to declare at least 90 per cent of their income as dividends to qualify for tax breaks.
Another attraction is their tax-efficient structure, since Reits do not pay income tax at the corporate level; individual investors, too, are exempt from paying any taxes on the dividend income received.
That makes them a much-sought after investment in the current low-interest rate environment, with banks paying next-to-nothing returns for savings deposits.
As a gauge of how hard-up investors are for high-yielding defensive plays, MGCCT's retail tranche of 215.1 million units was 8.9 times subscribed, while the institutional tranche, which made up two-thirds of the offer, was 38.1 times subscribed.
So it was not surprising to find investors cheering after Singapore Press Holdings (SPH) said it was mulling over the setting up of an SGX-listed Reit.
In their stampede to get a slice of SPH, they drove the media group's share price to a five-year high; it gained 35 cents, or 8.39 per cent, for the week to end at $4.52 yesterday.
SPH's announcement sent analysts into overdrive, working out the benefits it might derive from such a spin-off.
OCBC Investment Research analyst Eli Lee said SPH may inject two malls - Paragon and Clementi Mall - into the proposed Reit, with a third, Seletar Mall, positioned as a pipeline asset.
"Assuming that SPH retains a 51 per cent stake in the Reit, we estimate potential divestment gains of $625 million to $744 million," she added, as she hoisted SPH's target price up to $4.94.
UOB Kay Hian analyst Nancy Wei said the real boost to the media giant's share price "would be a large special dividend as SPH could reap cash proceeds of up to $1.46 billion if its stake in the Reit is reduced to 30 per cent".
She anticipated the new Reit to have a market cap of $2.087 billion upon listing.
Similarly, DBS Vickers analyst Andy Sim, who raised his target price for SPH to $4.79, noted that the establishment of a Reit would be a "trigger for share price outperformance and unlocking value for shareholders".
But it is not just Singapore where investors are falling madly in love with Reit initial public offerings.
Over in Hong Kong, there is a strong demand for defensive Reit plays as well. This has lured the city's developers into trying to monetise part of their property portfolios.
Hong Kong-listed New World Developments, for example, said over a week ago that it is considering the possibility of a separate listing for certain of its hospitality assets.
engyeow@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/