SGX Market Updates

China-Focused S-REITs Re-open Malls, Valuations Converge with Property Plays


18 March 2020

  • Singapore lists 5 property trusts exclusively investing in China – CapitaLand Retail China Trust, Sasseur REIT, Dasin Retail Trust, EC World REIT and BHG Retail REIT. Declines of the 5 property trusts have been varied in the 2020 YTD, varying from a 2% decline for Dasin Retail Trust to a 33% decline for CapitaLand Retail China Trust.

  • The average P/B ratio for the 5 property trusts is now 0.64x, converging with 150 property stocks listed in Singapore, Hong Kong, Japan, Australia and Taiwan, that generate all their revenue in China. At the end of 2019, these same 5 trusts averaged a 0.89x P/B, a 19% premium to the peer group.

  • 4 of the 5 property trusts maintained a lower Debt-to-Equity ratio than the peer group, with EC World REIT the exception, while 4 of the 5 property trusts, with the exception of Dasin Retail Trust maintained a higher Return-on-Equity than the peer group in the last reported FY.

There are a group of 150 Real Estate stocks listed across the exchanges of Singapore, Hong Kong, Japan, Australia and Taiwan that report all their revenue to the PRC. As a group, the 150 stocks have generated a median decline of 13% in the 2020 year through to 17 March, following a median gain of 5% in 2019. This decline have brought the median Price-to-Book (P/B) ratio of the group from 0.75x at the end of 2019 to 0.62x at present. 

By comparison, the 5 property trusts listed in Singapore that currently exclusively invest in PRC properties have averaged a 23% decline in the 2020 year through to 17 March, following an average total return of 21% in 2019. The relevant five trusts, sort by market value, are tabled below.

China-Based S-REIT/ Trust SGX
Mkt Cap
Div. Yield
based on
Past 12-month
Most Recent
Financial Results
CapitaLand Retail China Trust AU8U 1287 0.72 -33% 37% 9% click here
Sasseur REIT CRPU 719 0.67 -31% 28% 11% click here
Dasin Retail Trust CEDU 519 0.59 -2% 37% 9%* click here
EC World REIT BWCU 441 0.64 -24% 39% 11% click here
BHG Retail REIT BMGU 252 0.60 -26% 36% 8% click here
Average     0.64 -23% 35% 9%  

Note: Dasin Retail Trust is a business Trust and maintains an 8.5% yield based on unit price of S$0.80 and with distribution waiver.
Source: Thomson Reuters, Bloomberg, Company Financial Reports (Data as of 17 March 2020).

P/B Premiums of Five China-Focused REITs Have Narrowed from 19% to 2%

From their comparative strength in 2019, to the sharper declines in the 2020 year through to 17 March, the 5 property trusts have seen their P/B ratio converge to the foresaid peer group of 150 stocks. The average P/B ratio of the five property trusts stood at 0.89x at the end of 2019, a 19% premium to the peer group, that inter alia, could be attributed to REITs and property trusts generally maintain higher valuations than developers, which make up a large portion of the peer group.

The P/B premium of the 5 property trusts has since compressed as illustrated below, and the 5 trusts maintain an average P/B of 0.64x.

China-Based S-REITs PB & Return

Comparison of other Fundamental Factors

Based on their most recent filings, the 150 Real Estate stocks listed across the exchanges of Singapore, Hong Kong, Japan, Australia and Taiwan that report all their revenue to the PRC maintain a median Debt-to-Equity (DTE) ratio of 83% and Return-on-Equity (ROE) of 9%.

By comparison, 4 of Singapore’s 5 property trusts investing exclusively in China property maintain lower DTE and higher ROE. The cash flow per unit for all 5 property trusts are also higher than the median cash flow per share of the 150 Real Estate stocks.

The respective trusts and their fundamental ratios are illustrated below.

China-Based S-REITs ROE DTE

Sasseur REIT & BHG Retail REIT have Re-opened Malls

On 17 March, Sasseur REIT announced encouraging first day reopening sales from Sasseur REIT’s four outlet malls which had reopened progressively from 11 March 2020 (Click here for more). A week earlier, on 10 March, BHG Retail REIT announced that Hefei Mengchenglu Mall and Hefei Changjiangxilu Mall had reopened upon approval from the relevant local authorities (click here for more).

On 29 January, CapitaLand Retail China Trust noted of its 13 operational malls in China, CapitaMall Minzhongleyuan in Wuhan had been closed and will reopen when local conditions permit. CapitaLand Retail China Trust added that the mall represented less than 3% of CapitaLand Retail China Trust’s portfolio value as at 30 September 2019 and contributed approximately 0.5% of CapitaLand Retail China Trust’s net property income for the first nine months of 2019. As such, CapitaLand Retail China Trust maintained that it did not expect the temporary closure of CapitaMall Minzhongleyuan to have a material impact on CapitaLand Retail China Trust’s FY20 financial performance (click here for more).

CapitaLand Retail China Trust – Sowing Seeds Since 2006

CapitaLand Retail China Trust (CRCT) was listed on SGX on 8 December 2006, with a subscription rate amongst the highest ever registered in the Singapore stock market.  The initial portfolio comprised of seven retail malls in five key cities, and was the first pure-play China retail Real Estate Investment Trust (REIT) to list in Singapore. The value of the portfolio has grown from S$688.9 million at the IPO to S$3.2 billion as of the end of 2019.

Dividend distributions alone have seen investors who subscribed at the initial offer price of S$1.13 per unit had more than doubled their initial investment in returns through to 17 March 2020. Growing middle class and incomes and continued urbanisation were identified as key growth drivers for retail growth back in 2006. 

Combined with the 3 REITs with initial portfolios that were exclusively invested in PRC-based properties (BHG Retail REIT, EC World REIT and Sasseur REIT), and Business Trust Dasin Retail Trust, the 5 trusts have properties located throughout the PRC as illustrated below.

China-Based S-REITs Properties Locations

China’s Structural Shifts Since 2006

Back in 2006, China GDP stood at US$2.75 trillion, with a significant population of 1.311 billion. Since then, GDP has grown fivefold to US$14.1 trillion through to 2019, with the population steadily growing to 1.435 billion. Urbanisation and economic rebalancing has also seen tertiary industries become the biggest employer across China. Tertiary services now account for half the jobs in China, versus primary industries being the biggest employer in 2006 with tertiary jobs then making up one-third of the workforce. 

Although labor costs have risen in recent years, IMF Executive Director for the PRC, Jin Zhongxia, notes that China now has the largest pool of reasonably priced professional labor force such as engineers and technicians with the number of college graduates in 2018 reaching a record high of 8.2 million, with science, technology, engineering, and mathematics majors (STEM) accounting for more than 50% of total graduates.

With its foundation of high savings rates, China’s significant investment-led stimulus between 2009 and 2012 has seen general government gross debt rise from 16.5% of GDP in 2006, to 40.3% in 2019, with the current account balance moving from 9.3% of GDP to 0.4% of GDP in 2018. Coinciding with the consistency and depth of SME structural reforms, Dr Jin estimates that domestic private owned firms currently account for over 60 percent of GDP and over 80 percent of employment in China.

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