How to value a REIT with gearing ratio
What is the gearing ratio?
Gearing is the ratio of a REIT's debt to its total property value, also known as aggregated leverage. It is a metric that investors use to assess a company's financial leverage.
High and low gearing ratio
An optimal gearing ratio is primarily determined by the individual company relative to other companies within the same industry. However, you can refer to the basic guidelines for good and bad gearing ratios:
- A gearing ratio higher than 50% is typically considered highly levered or geared. As a result, a company is more susceptible to economic downturns and the business cycle.
- A gearing ratio lower than 25% is typically considered relatively lower risk by both investors and lenders.
- A gearing ratio between 25% and 50% is typically considered optimal or normal for well-established companies.
5 S-Reits with the lowest gearing ratios
On average, S-Reits have maintained a gearing ratio of 36.8%, based on the latest company filings published in mid-Aug 2022.
The five S-Reits with the lowest reported gearing ratios (Data as of Aug 2022, SGX)
are shown below:
are shown below:
1. Digital Core Reit
As of Jun 30, 2022, Digital Core Reit reported aggregated leverage of 25.7% and forecasts debt headroom of US$194 million at 35% aggregated leverage. The Reit plans to distribute 2.37 US cents to unitholders as its first payout on Sept 28.
2. Sasseur Reit
Sasseur Reit has consistently maintained one of the lowest gearing ratios among S-Reits at 26.5% aggregated leverage as of Jun 30, 2022. The Reit intends to finish its debt refinancing by the end of 2022.
3. Frasers Logistics & Commercial Trust
As of June 30, 2022, Frasers Logistics & Commercial Trust reported aggregate leverage of 29.2%, a decrease of 3.9 percentage points from the previous quarter. Its logistics and industrial portfolios maintained full occupancy with no expirations in Q4FY22, while the commercial portfolio recorded an occupancy rate of 91.3%.
4. SPH Reit
As of May 31, 2022, SPH Reit reported a 30.1% gearing ratio. The Reit maintained a high occupancy rate of 97.6%. The Reit declared Q3FY22 DPU of 1.45 cents and year-to-date Q3 gross revenue of S$211.6 million, up 0.9% year on year.
5. IReit Global
The overall leverage of IReit Global decreased from 32.1% as of Dec 31, 2021, to 30.8% as of Jun 30, 2022. This was mainly driven by the 12-year major new lease for roughly 5,300 square meters of data center space at Sant Cugat Green in Q2 2022 and the 6-year lease extension for 100% of Bonn Campus.
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Reference
Disclaimer:This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Tap for more details.
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Winning Trades : @ MooMoo Sg I know I SHOULD check, but other than taking note from articles like this, can you share where can I easily find this financial ratio? On the MooMoo platform, for stocks you can find some other financial ratios (but not Aggregated Leverage) on Quotes > Analysis, but for Reits, there is no Analysis-tab even.
Poppyloli : This is article is informative but I would also like to know where to find the gearing ratio
Felayt Winning Trades : If you look into one reit, for example, SPH REITs, you can see the "Financial" bottom on the top. And you can find many indicators and statements under the "financial' section. If you want to know the gearing ratio, you can check the balance sheet under the "statements", the ratio below the graph is gearing ratio. Hope it may help you.![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Felayt Poppyloli : If you want to know the gearing ratio, you can check the balance sheet under the "statements". The ratio below the graph is the gearing ratio. Hope it may help you.
Poppyloli Felayt : thank you very much
Winning Trades Felayt : Thank you very much for sharing the information so clearly. I didn't see those tabs you mentioned because I normally use MooMoo on laptop browser. Now then I realize the mobile-app has more tabs and more information! (Either the laptop software has less capabilities or I don't know how to do setting to include all the tabs.)