Business Trusts back in favour (ST)
BY Grace Leong
Source: The Straits Times, 14 June 2014
BUSINESS trusts in Singapore are regaining favour after being hammered down over the past few months amid expectations of rising interest rates.
Analysts cited attractive yields and concerns easing for now over a looming move to scale back the massive United States stimulus programme.
Investors had feared that any stimulus cuts would reduce the liquidity that has kept world markets buoyant, and send interest rates up - which could make investments in the US more attractive than those in emerging economies.
According to a report by SGX My Gateway, Singapore-listed business trusts averaged 6.9 per cent total returns for the first half of the year - its best showing since 2009 when global stock markets started recovering from the 2008 crisis. There are now 12 trusts listed on the Singapore Exchange, up from four last year.
A business trust manages and operates a business enterprise. Business trusts are becoming increasingly popular structures for delivering funding to infrastructure projects and evaluating real estate and transportation assets.
With a combined market capitalisation of $14.5 billion, these 12 stocks currently maintain an average indicative dividend yield of 7.8 per cent. The three largest capitalised stocks are Hutchison Port Holdings Trust, Asian Pay Television Trust (APTT) and CitySpring Infrastructure Trust, which have a combined market value of $10 billion.
The three best-performing stocks in terms of year-to-date total returns were Religare Health Trust, up to 23.1 per cent; Ascendas India Trust, up to 20.5 per cent; and Croesus Retail Trust (CRT), up to 14.9 per cent, according to the report.
PhillipCapital, which has a buy call on CRT, cited "an expected above-market distribution yield of 9.2 per cent; stable income- producing assets with strong real estate fundamentals and potential growth through acquisition pipeline".
CRT, an Asia-Pacific retail business trust with a portfolio located in Japan, reported net property income of 933 million Japanese yen (S$11.5 million) for the third quarter, which was 12.3 per cent higher than management forecast. This was due to better-than- expected tenant sales at Mallage Shobu, the biggest mall within the portfolio.
The largest business trust to list on SGX was APTT. AmFraser Securities, which is maintaining a buy call on APTT, cited its "stable utility-like cash flows characteristic of cable and telecoms companies" and the encouraging "continuing growth in Taiwan cable broadband subscribers, with 72,000 additions last year".
"Additionally, we think the potential growth in yield from new coverage areas in Taichung has not been recognised by the market."
APTT's expanded core network now covers more than 30 per cent of homes in these areas. DBS Group Research Equity has a buy call on Hutchison Port Holdings Trust, saying it is "looking to deliver at least stable distribution per unit in 2014, driven by mid-single digit volume growth at its terminals".
"The trust's Hong Kong operations especially, look set to post encouraging growth numbers over the following months. Management noted that the shipping lines' confidence in Hong Kong Port as a gateway to China seems to be returning, especially with new wage agreements with port contractors for 2014 now agreed and settled. Yantian Port also seems on track to meet our low single-digit growth projections, as both US and European Union trade flows
have improved this year on the back of mild improvements in economic activity."