What Investors Should Know About Fortune Real Estate Investment Trust’s Latest Earnings And Valuation
Fortune Real Estate Investment Trust (SGX: F25U) is a REIT that owns shopping malls in Hong Kong. Its portfolio currently holds 17 retail properties that collectively have nearly 3.2 million square feet of retail area.
Examples of the malls in the REIT’s portfolio include Provident Square, Fortune City One, Fortune Kingswood, and Ma On Shan Plaza.
There are two things about the REIT that investors may want to know about: Its latest financial performance and valuation.
Latest financial performance
Fortune REIT does not release its financial results on a quarterly basis. Instead, it does so on a half-yearly basis. The table shows some important financial numbers for the REIT from its latest earnings release (for 2016):
Source: Fortune REIT 2016 full year earnings
We can see that 2016 was a good year for Fortune REIT as it experienced improvement in its revenue, net property income, cost-to-revenue ratio, distribution per unit (DPU), and net asset value per unit.
Fortune REIT had experienced healthy rental reversion across its portfolio as well as a full year’s worth of increased rentals from the asset enhancement initiatives at Belvedere Square.
In its earnings release, Fortune REIT also commented about its future. It said:
“Fortune REIT’s portfolio of private housing estate retail properties, which cater mainly to day-to-day shopping needs with approximately 60% of the tenants in the non-discretionary retail sector, is expected to remain resilient on the back of low unemployment and rising incomes in Hong Kong in the near term.”
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows Fortune REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 39 REITs that are in Singapore’s stock market.
Source: SGX Stock Facts; data as of 19 June 2017
We can see that Fortune REIT’s distribution yield is at a premium to the market. But, the REIT’s price-to-book ratio is significantly lower than the average REIT in Singapore.