SGX Real Estate Index Priced Below Book Value with Yields Near 6%

OREANDA-NEWS. Introduced this month, the SGX Real Estate Index is a free-float, market capitalisation weighted index that measures the performance of the listed real estate sector in Singapore. Constituents in the index include real estate developers, real estate operators and real estate investment trusts. As of yesterday’s close, the 54 stocks were trading at average price-earnings (P/E) and price-to-book (P/B) ratios of 12.8 and 0.8 respectively, while maintaining a dividend yield of 5.9%.

Book value is made up of the stock’s tangible assets net of liabilities (such as debt), and expressed as a function of the shares outstanding. The price-to-book (P/B) ratio is used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. The ratio is a common gauge used by investors to determine whether a firm may be undervalued or overvalued. The frequency of net asset valuations, additional capital raisings and unit prices are predominant drivers of the P/B ratio. As noted in the My Gateway Highlight, by comparison, the STI trades at a P/B ratio of 1.1.

Weightings of the SGX Real Estate Index components are capped at a maximum 10% at each semi-annual rebalance, so that it is better diversified across a range of stocks. Currently, the five largest stocks by index weight are CapitaLand, Hongkong Land Holdings, Global Logistic Properties, Ascendas REIT and CapitaLand Mall Trust.  Combined, these five companies make up almost 50% of the Index. Liquidity is also reviewed semi-annually, and is measured as a percentage of a company’s Daily Traded Value with respect to its Free-Float Market Capitalisation. 

The five best performers of the Index in the year thus far are Debao Property Development, IPC Corporation, Weiye Holdings, Ascendas India Trust and Mapletree Industrial Trust. These five averaged a year-to-date return of 79.4%, with the median return at 17.6%.

The 54 constituents of the SGX Real Estate Index are tabled below, and are sorted according to index weight. Clicking on a stock name will take you to its relevant page on StockFacts.

Source: SGX, Bloomberg & SGX StockFacts (data as of 22 December 2015)

Note: LHN Limited has experienced irregular trading activity in the year-to-date

*Note: HongKong Land’s market cap is in USD

Alongside the SGX Real Estate Index, SGX also recently introduced the SGX S-REIT 20 Index. The SGX S-REIT 20 Index measures the performance of the largest and most tradable real estate investment trusts listed in Singapore. Singapore’s REIT Sector comprises 35 trusts, whose assets include shopping malls, office towers, industrial parks, hospitality-related assets and healthcare-related assets.