REITs Screening Criteria III

It was with some interest that I read articles expressing Citigroup's and UOB KayHian's positive sentiments towards S-REITs.

In an earlier post, I had highlighted the following as my selection criteria:

Stability

1. Low gearing, i.e. < 35% (also the limit for REITs without a credit rating)
2. Presence of a sponsor, preferably a strong one, eg. Capitaland, F&N, etc
3. Portfolio mainly in Singapore, as I will have a local knowledge of the industry in that case

Value-for-money

1. Discount to NAV, i.e. paying less for more
2. High yield, preferably > 8% p.a.
3. Quarterly distributions (as opposed to semi-annually), this is just a personal preference to improve my own cash flow

With the run-up in prices recently, "discount to NAV" and "high yield" have become harder to find. To illustrate the point, here is a comparison of two snapshots in time of selected REITs according to the criteria above:

The difference couldn't be more stark in the yield column. From my own calculations, Sabana remains the only REIT with annual yield just slightly above 8% (note: not reflected in the list above due simply to the fact that Sabana's IPO was only in Nov 2010). And according to this blog, current yield levels for S-REITs range from the mid-4% to slightly above 8%.

My thoughts? Even for yield stocks, buy only when one is comfortable with the rate. For myself, I prefer to wait out with respect to S-REITs at this point in time and look for value elsewhere if it can be found.