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ERC Mutual Fund Allocation
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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...