RMIT University Investment and Fund Management Paper

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ERC Mutual Fund allocation Students name: University: Course name: Instructors name: Due date: REAL ESTATE SECTOR According to Modern intelligence (2020), it is anticipated that the Singaporean real estate market would grow at a compound annual growth rate (CAGR) of over 3.2% during the course of the forecast (2022-2027). Investors can rest assured in Singapore's stable real estate market, and prices appear to be rising steadily. In 2021, notwithstanding COVID-19, the Singapore real estate market saw growth. Sources report that in 2021, there were a total of 28,734 sales of non-landed residential properties worth $2 billion. The overall number of transactions increased by 57% from 2020 when it was 18,295. 12 574 of the deals involved brand new, never-before-on-the-market properties, while 15 677 involved previously owned homes. Overview of CapitaLand Ascendas CapitaLand Ascendas REIT is the first and biggest publicly traded commercial and industrial Real Estate Investment Trust in Singapore (REIT). The company has investments in the logistics, industrial, commercial, and data center markets. These assets are in developed markets like Singapore, Australia, the US, and the UK/Europe (Vijayaraghavan & Desai, 2017) Multiple indices have CapitaLand Ascendas REIT as a component. There are a few examples, such as the FTSE Straits Times Index, the MSCI Index, the EPRA/NAREIT Global Real Estate Index, and the GPR Asia 250. Moody's Investors Service has given CapitaLand Ascendas REIT an issuer rating of "A3." Ascendas Real Estate Investment Trust (Ascendas REIT) was listed on the Singapore Stock Exchange in November 2002. As of 31 March 2022, the trust had a diversified portfolio of 95 properties in Singapore, 36 in Australia, 49 in the UK and Europe, and 41 in the US, with a total appraised value of SGD16.4 billion. Table 1: Ascendas compared to other companies Company Mapletree Pan Commercial Trust Asia Lendlease Global ASCENDAS Commercial REIT ESTATE INVESTMENT TRUST EPS ttm 2022 0.0210 0.1 0.24 P/E ratio 0.65 7.35 11.54 Dividend (annual 2022) 4.89% 5.64% 5% (October 96.9% 99.9% 100% Occupancy 2022) REAL Ascendas Real Estate Investment Trust (SGX: A17U) shares decreased 1.4% in May 2022, despite the company's news that it will spend S$133.2 million to buy seven logistics facilities in Chicago. Concerns about rapid interest rate hikes and the global economic impact of China's ongoing Covid-zero initiatives have led real estate equities down about 6% this year. The blue-chip stock has an average 'outperform' rating and a S$3.26 price target (based on the most updated SGX StockFacts data). The target price represents a 17.7 percent rise over AREIT's last closing price of S$2.77 per share. OCBC analysts provided recent price estimates and a thesis statement for AREIT. They cut their price target for the company from S$3.84 to S$3.43 in early May, but they still suggested purchasing the shares. Why invest in it The company has positive earnings per share of 0.24 while the others Mapletree Pan Asia Commercial Trust and Lendlease Global Commercial REIT have 0.021 and 0.1 respectively (table 1). The company is big having a market capitalization of 8.4 billion USD. The end-of-the-year revenue for the year 2021 is 912.9 million USD which is an increase of 16.9%. In September 2022, the company agreed to acquire a food storage and distribution center in western Singapore from PGIM Real Estate for US$136.5 million. The company also has a 100% occupancy rate which is so impressive. Ascendas real estate investment trust had a good dividend yield of 5% which is more than that of Mapletree Pan Asia Commercial Trust which was 4.89%. One of the fundamental factors is that in May, the company entered into an agreement to acquire a portfolio of seven logistics properties in Chicago, Illinois, the US for US$99 million. TELECOMMUNICATION SECTOR Industry Investors are pessimistic about Singapore's Communication Services sector, implying that the industry would grow at a slower rate in the long run than in the past. The sector's current P/E of 22.2x is lower than the sector's three-year average of 51.7x. The current P/S ratio in the industry is very close to its long-term average of 3.2x. Earnings in the Communication Services sector have increased at a 6.5% annual pace on average over the last three years. Their annual revenue declines, however, have averaged 5.9%. This implies that overall sales are declining, but profits are increasing due to lower operating costs. Singapore Telecommunications Ltd Singtel, or Singapore Telecommunications Limited, is one of Singapore's four major telcos. Prior to the year 1995, the company was known as Telecommunications Equipment. Singtel is an ISP that also offers mobile phone networks, landline telephone service, and IPTV (Singtel TV). Singtel has aggressively expanded beyond its home market, and it now owns 100% of Australia's second-largest telco Optus and 32.15 percent of India's second-largest carrier, Bharti Airtel. Singtel has a strong presence in both the Australian and Singaporean markets, with 82% of the fixed-line market, 47% of the mobile market, and 43% of the internet market in Singapore. Furthermore, Temasek Holdings, the Singaporean government's investment arm, owns a majority share in Singtel, making it the second-largest firm listed on the Singapore Exchange by market value. Singtel is an enthusiastic supporter of new enterprises that are pushing the boundaries of technology innovation through its wholly-owned subsidiary Singtel Innov8, which was created in 2011 with sea ed capital of S$200 million. Earnings for Singtel are impressive and industry analysts predict that the company will gain momentum in the second quarter and beyond due to increases in roaming revenue, a positive effect from Optus' repricing, and the sale of non-core assets. Stronger donations from businesses and more visitors from other countries have led to a rise in prepaid traffic and income. Due to its strong earnings performance and the value, it has been able to unlock through asset monetization initiatives, Singtel remains our top choice for a telecommunications company. Analysts think that Singtel's cyber-security subsidiary Trustwave, which is losing money, will be sold next (for about S$700 million) as part of the company's plan to use its capital more efficiently. Table 2: Singtel comparison to StarHub and industry Starhub Singapore Industry Telecommunications P/E ratio 13.58 21.46 EPS 0.08 0.13 P/B ratio Dividend yield 1.594 6.10% 21.36 1.64 3.31% Singapore telecommunications have a good earning per share (EPS) of 0.13 which is bigger than that of the competitor StarHub at 0.08. Singapore telecommunication exceeded the industry value in PE ratio and PB ratio. The company has a PE ratio of 21.46 and PB ratio of 1.594 while the industry has a 21.36 PE ratio and a 1.64 PB ratio. The PE ratio is 1.594 which is lower than the industry standard thus it is slightly undervalued. BANKING SECTOR Singapore coordinates financial services throughout the entire Asia-Pacific region. Because of its ideal location with respect to regional markets, many banking institutions locate their headquarters in the country. The banking industry plays an important role in the national economy as a result of government policies that have liberalized and opened up the banking sector to both domestic and foreign investment. The domestic market is extremely sophisticated, with one of the highest credit card usage rates in Asia and practically universal access to bank accounts. The Monetary Authority of Singapore (MAS) was established in 1971 and serves as the industry's regulatory agency. DBS Group (SGX: D05) DBS Group Holdings Ltd is a global provider of financial services with operations in Singapore, Hong Kong, Greater China, South and Southeast Asia, and other regions. Retail Banking and Wealth Management, Corporate Banking, Treasury Markets, and Other make up the company's operational divisions. The Consumer Banking/Wealth Management section provides services such as checking and savings accounts, fixed deposits, loans and mortgages, credit and debit cards, electronic payment systems, and insurance to the general public. It provides a vast array of financial services, such as cash management, trade finance, securities and fiduciary, treasury, and markets products, corporate finance and advisory banking, and capital markets solutions. Treasury Markets is responsible for the structuring, market-making, and trading of a variety of government-issued products. You can find Islamic banking choices under "Other." This company's Singaporean headquarters trace back to its foundation in 1968. Analysts at both RHB and Maybank have recently renewed their 'buy' recommendations on the bank's stock. RHB and Maybank both decreased their pricing forecasts, with RHB dropping from S$42.70 to S$38.10 and Maybank dropping from S$41.82 to S$41.22. Table 3: DBS, UOB and OCBC return comparison Name Stock Market Dividend Total 1 code Cap Yield (%) Return Total Total YTD (%) Return (%) Return (%) (S$M) Year 3-Year Ranking based on YTD total return DBS D05 80,440 2.8 28 51.9 46.8 19 UOB O39 44,945 3.7 23.4 39.9 22 27 OCBC U11 53,884 3.4 23.2 41.6 27 28 Source: Bloomberg (2021) The bank compared to others has a year-to-date of 28 which is a bigger return compared to UOB’s 23.4% and OCBC’s 23.2%. the company also has a good history in returns. It has a 46.8% return in 3 years which is impressive. The competitors have 22% for UOB and 27% for OCBC. Table 4: Ratio Comparisons OCBC UOB DBS Industry P/E ratio 10.4 11.4 13.53 11.7 Dividend yield 4.49% 3.84% 4.09% 3.55% P/B ratio 0 1.25 1.64 1.36 EPS TTM 2022 ($) $0.86 $-1.63 $1.99 $2.979B $4.983B Net income (year S$ 4.86B ending dec 2021) Source: sgx The company has an impressive dividend ratio of 4.09% which exceed the industry which is by 3.55%. The company price to book value (1.64) also exceeds that of the industry (1.36) and that of UOB (1.25). The trailing twelve months’ EPS is also impressive. DBS has $1.99 while OCBC has $0.86. the bank had also a net profit greater than the other banks in the year 2021. DBS also had bad debts worth 6,091 mn USD on 30th June 2021. DBS also had a profit of $4.983 billion USD for the year ended Dec 2021. PORTFOLIO COMBINATION I will invest more money in the banking sector which is more promising in Singapore by investing in DBS bank. Real estate will be invested in a share of 18% of the money because it is safer and offers good diversification. The rest will be invested in Singapore telecommunication which is good for a long-term investment opportunity. Shown in Appendix I. Table 5: Portfolio Combination Share number of total percentage of the price shares value portfolio CapitaLand Ascendas 2.77 175000 484750 18% Singapore 2.79 30000 83700 8% 35.61 12000 427320 43% Telecommunications Ltd DBS Group Source: SGX (As of November 18, 2022) References • Vijayaraghavan, N., & Desai, U. (2017). THE SINGAPORE BLUE CHIPS: The Rewards & Risks of Investing in Singapore’s Largest Corporates. • Yahoo finance. Website: yahoofinance.com • Singapore securities exchange. (2022). https://www.sgx.com/securities/securities-prices • Modern intelligence (2020). Singapore real estate market - growth, trends, covid 19 impact and forecast (2022 - 2027) Link: https://www.mordorintelligence.com/industry-reports/singapore-real-estate-market APPENDIX: Appendix I: Portfolio Combination portfolio contribution 18% 43% CapitaLand Ascendas 8% Singapore Telecommunications Ltd DBS Group
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ERC Mutual Fund Allocation

Students name:
University:
Course name:
Instructors name:
Due date:

REAL ESTATE SECTOR

3

Overview of CapitaLand Ascendas

3

Why invest in it?

4

TELECOMMUNICATION SECTOR

4

Industry

4

Singapore Telecommunications Ltd

5

BANKING SECTOR

6

DBS Group (SGX: D05)

6

PORTFOLIO COMBINATION

8

References

9

REAL ESTATE SECTOR
According to Modern intelligence (2020), it is anticipated that the Singaporean real estate
market would grow at a compound annual growth rate (CAGR) of over 3.2% during the course of
the forecast (2022-2027). Investors can rest assured in Singapore's stable real estate market, and
prices appear to be rising steadily. In 2021, notwithstanding COVID-19, the Singapore real estate
market saw growth. Sources report that in 2021, there were a total of 28,734 sales of non-landed
residential properties worth $2 billion. The overall number of transactions increased by 57% from
2020 when it was 18,295. 12 574 of the deals involved brand new, never-before-on-the-market
properties, while 15 677 involved previously owned homes.
Overview of CapitaLand Ascendas
CapitaLand Ascendas REIT is the first and biggest publicly traded commercial and
industrial Real Estate Investment Trust in Singapore (REIT). The company has investments in the
logistics, industrial, commercial, and data center markets. These assets are in developed markets
like Singapore, Australia, the US, and the UK/Europe (Vijayaraghavan & Desai, 2017)
Multiple indices have CapitaLand Ascendas REIT as a component. There are a few examples, such
as the FTSE Straits Times Index, the MSCI Index, the EPRA/NAREIT Global Real Estate Index,
and the GPR Asia 250. Moody's Investors Service has given CapitaLand Ascendas REIT an issuer
rating of "A3." Ascendas Real Estate Investment Trust (Ascendas REIT) was listed on the
Singapore Stock Exchange in November 2002. As of 31 March 2022, the trust had a diversified
portfolio of 95 properties in Singapore, 36 in Australia, 49 in the UK and Europe, and 41 in the
US, with a total appraised value of SGD16.4 billion.
Table 1: Ascendas compared to other companies
Company

Mapletree Pan Asia Lendlease
Commercial Trust

Global ASCENDAS

Commercial REIT

REAL

ESTATE
INVESTMENT
TRUST

EPS ttm 2022

0.0210

0.1

0.24

P/E ratio

0.65

7.35

11.54

P/B ratio

0.87

0.81

Dividend

(annual 4.89%

5.64%

5%

Occupancy (October 96.9%

99.9%

100%

2022)

2022)

Ascendas Real Estate Investment Trust (SGX: A17U) shares decreased 1.4% in May 2022,
despite the company's news that it will spend S$133.2 million to buy seven logistics facilities in
Chicago. Concerns about rapid interest rate hikes and the global economic impact of China's
ongoing Covid-zero initiatives have led real estate equities down about 6% this year. The blue-chip
stock has an average 'outperform' rating and a S$3.26 price target (based on the most updated SGX
StockFacts data). The target price represents a 17.7 percent rise over AREIT's last closing price of
S$2.77 per share. OCBC analysts provided recent price estimates and a thesis statement for AREIT.
They cut their price target for the company from S$3.84 to S$3.43 in early May, but they still
suggested purchasing the shares.
Why invest in it?
The company has positive earnings per share of 0.24 while the others Mapletree Pan Asia
Commercial Trust and Lendlease Global Commercial REIT have 0.021 and 0.1 respectively (table
1). The company is big, having a market capitalization of 8.4 billion USD. The end-of-the-year
revenue for the year 2021 is 912.9 million USD which is an increase of 16.9%. In September 2022,
the company agreed to acquire a food storage and distribution center in western Singapore from
PGIM Real Estate for US$136.5 million.
The company also has a 100% occupancy rate which is so impressive. Ascendas real estate
investment trust had a good dividend yield of 5% which is more than that of Mapletree Pan Asia
Commercial Trust which was 4.89%. One of the fundamental factors is that in May, the company
entered into an agreement to acquire a portfolio of seven logistics properties in Chicago, Illinois,
the US for US$99 million.
TELECOMMUNICATION SECTOR
Industry
Investors are pessimistic about Singapore's Communication Services sector, implying that
the industry would grow at a slower rate in the long run than in the past. The sector's current P/E

of 22.2x is lower than the sector's three-year average of 51.7x. The current P/S ratio in the industry
is very close to its long-term average of 3.2x. Earnings in the Communication Services sector have
increased at a 6.5% annual pace on average over the last three years. Their annual revenue declines,
however, have averaged 5.9%. This implies that overall sales are declining, but profits are
increasing due to lower operating costs.
Singapore Telecommunications Ltd
Singtel, or Singapore Telecommunications Limited, is one of Singapore's four major telcos.
Prior to the year 1995, the company was known as Telecommunications Equipment. Singtel is an
ISP that also offers mobile phone networks, landline telephone service, and IPTV (Singtel TV).
Singtel has aggressively expanded beyond its home market, and it now owns 100% of Australia's
second-largest telco Optus and 32.15 percent of India's second-largest carrier, Bharti Airtel. Singtel
has a strong presence in both the Australian and Singaporean markets, with 82% of the fixed-line
market, 47% of the mobile market, and 43% of the internet market in Singapore. Furthermore,
Temasek Holdings, the Singaporean government's investment arm, owns a majority share in
Singtel, making it the second-largest firm listed on the Singapore Exchange by market value.
Singtel is an enthusiastic supporter of new enterprises that are pushing the boundaries of technology
innovation through its wholly-owned subsidiary Singtel Innov8, which was created in 2011 with
seed capital of S$200 million.
Earnings for Singtel are impressive and industry analysts predict that the company will gain
momentum in the second quarter and beyond due to increases in roaming revenue, a positive effect
from Optus' repricing, and the sale of non-core assets. Stronger donations from businesses and
more visitors from other countries have led to a rise in prepaid traffic and income. Due to its strong
earnings performance and the value it has been able to unlock through asset monetization
initiatives, Singtel remains our top choice for a telecommunications company. Analysts think that
Singtel's cyber-security subsidiary Trustwave, which is losing money, will be sold next (for about
S$700 million) as part of the company's plan to use its capital more efficiently.
Table 2: Singtel comparison to StarHub and industry
Starhub

Singapore

Industry

Telecommunications
P/E ratio

13.58

21.46

EPS

0.08

0.13

21.36

P/B ratio
Dividend yield

1.594
6.10%

1.64

3.31%

Singapore telecommunications have a good earning per share (EPS) of 0.13 which is bigger
than that of the competitor StarHub at 0.08. Singapore telecommunication exceeded the industry
value in PE ratio and PB ratio. The company has a PE ratio of 21.46 and PB ra...


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