Profile 2: Joey, 40 years old, male (see cover story here)
As a middle manager in a medical services company, 40-year-old Joey has spent close to two decades in the workforce and has accumulated sizeable savings worth more than three years’ salary.
With one child in primary school, Joey is looking for a mix of growth and value stocks, which will offer potential gains and high dividend yields, respectively.
That said, he leans towards a conservative investing style, targeting an annual return in the mid-single digits.
Coming from the medical sector, Joey is familiar with names like Raffles Medical and Parkway Life REIT. One of Asia’s largest listed healthcare REITs, Parkway Life REIT has a total portfolio size of 61 properties totalling approximately $2.35 billion as at Sept 30. Assets include Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital in Singapore, and MOB Specialist Clinics in Kuala Lumpur, Malaysia.
The bulk of the REIT’s portfolio assets is located in Japan, totalling 57 hospitals, medical centres and nursing homes. In the markets, Parkway Life REIT is known for its steady unit price appreciation over the years. The REIT’s unit price has grown from some $2.90 five years ago to $3.89 as at Nov 30.
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Parkway Life REIT has also posted consistent growth in distribution per unit (DPU), registering an increase of 122.8% since its IPO in 2007.
Meanwhile, Raffles Medical has enjoyed a lift from providing pandemic-related testing and vaccination services, although this has since tapered off somewhat. That said, the company reported earnings of $59.7 million for the 1HFY2022 ended June, 51.3% higher y-o-y. The most recent results for 3QFY2022 ended September saw a “stronger-than-expected” net profit of $38.3 million, up 62.1% y-o-y.
The company could see further upside when China reopens its borders. Raffles Medical is on track to open its first in-vitro fertilisation/assisted reproductive therapy centre in Hainan by 1Q2023. The facility will complement offerings in its three existing China hospitals by forming a full life-cycle service chain within its O&G practices for its patients across China.
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Analysts believe Raffles Medical’s China business, especially operations at its Shanghai hospital, will see a gradual ramp-up in operations in 2023.
Once a week, Joey’s family visits their favourite restaurant at 313@Somerset. The mall and Jem in Jurong are the two retail assets owned by Lendlease Global Commercial REIT (LREIT). LREIT is well-placed to ride on the economic recovery for growth, as its local malls are located in prime and high-footfall areas, says CEO Kelvin Chow. Listed in October 2019, LREIT also holds a freehold interest in Sky Complex in Milan, Italy, which comprises three Grade-A office buildings. As at June 30, tenant sales had surpassed the pre-pandemic average.
LREIT’s DPU increased by 3.7% y-o-y to 4.85 cents in FY2022 ended June, and gross revenue gained 29.3% y-o-y to $101.7 million. These figures brought its net property income (NPI) to $75.5 million, 32.7% higher y-o-y.
The revival of Singapore’s shopping belt is also welcome news to the hotels that line the boulevard. On their weekly visits, Joey’s family has noticed the return of tourists, a boon to hospitality stocks CDL Hospitality Trusts (CDLHT), Far East Hospitality Trust (FEHT) and OUE Commercial REIT (OUE C-REIT).
According to data from the Singapore Tourism Board, revenue per available room (RevPAR) for Singapore hotels rose to an alltime high of $236.52 in September, surpassing the previous high of $225.89 in February 2014.
CDLHT is a stapled group comprising CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust. For 3QFY20222 ended September, CDLHT’s gross revenue increased 46.4% y-o-y to $58.5 million, with $31.8 million contributed by its hotels in Singapore.
CDLHT has six hotels in Singapore — its most concentrated market — with one still in use as an isolation facility. These properties include Orchard Hotel, M Hotel, Grand Copthorne Waterfront Hotel and W Singapore Sentosa Cove.
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Meanwhile, FEHT has in its portfolio nine hotels and three serviced residences. Currently, FEHT has four out of its nine hotels on government contracts for isolation purposes till this month or the next. Five of the hotels — Vibe Hotel Singapore Orchard, Village Hotel Bugis, Oasia Hotel Novena, Orchard Rendezvous Hotel and Quincy Hotel Singapore — are situated within walking distance of major medical centres and hospitals popular among medical tourists.
FEHT is a pure proxy play on the recovery of room rates in Singapore, says UOB Kay Hian Research analyst Jonathan Koh. “FEHT will benefit from the reopening of Singapore’s international borders on a full-year basis in 2023. One of its nine hotels started to contribute variable rent in 3QFY2022, with a second hotel expected to do so in 4QFY2022.”
FEHT reported a 12% higher y-o-y distributable income of $15.1 million for 3QFY2022 ended September. It also gained $39.3 million from the divestment of Central Square in March. The REIT plans to distribute $8 million per year over three years. For FY2022, FEHT plans to dish out a capital distribution of $6.2 million.
Finally, OUE C-REIT’s flagship hotel along Orchard Road was relaunched earlier this year as Hilton Singapore Orchard. Formerly Mandarin Orchard Singapore, the refreshed hotel boasts 1,080 rooms, and accounted for 18.5% of the REIT’s revenue in 1HFY2022 ended June.
OUE C-REIT has seven properties across the commercial and hospitality segments in Singapore and Shanghai, with total assets of $5.8 billion as at June 30. Revenue in 3QFY2022 ended September increased by 1.7% y-o-y to $59.5 million, while net property income (NPI) increased 4.4% y-o-y to $48.3 million.
As at Sept 30, the overall hospitality segment RevPAR increased 15.5% q-o-q to $262 due to strong demand from the return of tourism and the recovering Mice (meetings, incentives, conferences and exhibitions) sector, as well as higher room rates at Hilton Singapore Orchard.
“When we opened as Hilton Singapore, our average day rates (ADR) were $300. Then in May, ADR increased to $400 and now it is $500,” CEO Han Khim Siew tells The Edge Singapore.
With Joey’s busy schedule, however, tracking individual stocks may prove too much of a hassle. Instead, the bulk of Joey’s portfolio consists of exchange-traded funds (ETFs). The SPDR Straits Times Index (STI) ETF, for example, tracks the performance of the top 30 stocks on the mainboard.
Singapore’s three banks make up nearly half the overall holdings, with DBS Group at 20.12%, Oversea-Chinese Banking Corp (OCBC) at 13.82% and United Overseas Bank (UOB) at 12.71% of the ETF as at Nov 30.
A sharp fall in share prices upon the outbreak of Covid-19 wiped out a third of the STI ETF’s value within two weeks in March 2020. Since then, the STI ETF has recovered to February 2020 levels of 3,345 points as of Dec 1, or $3.34 per share.
Joey bought 1,000 shares of the STI ETF at its debut in April 2002. Since its inception, the ETF has posted annualised returns of 6.24%, as at Oct 31. As at Dec 1, the ETF has assets under management of some $1.64 billion.
In January, the Singapore Exchange (SGX) reduced the board lot size of all locally-listed ETFs to 1 unit, “supported in part by the significant growth in dollar cost averaging”. This means investors like Joey can now trade ETFs with more precision and take advantage of the rebound in Singapore’s economy, such as the 16.7% recovery between Nov 30, 2020, and Nov 30 this year. With stable holdings, Joey’s portfolio is on track to grow much larger in 20 years as investments mature.
See our suggestions for 26-year-old Samantha and 65-year-old Robert.
