OUE Commercial Real Estate Investment Trust (SGX:TS0U) is a SGD$1.11B real estate investment trust (REIT), which is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Singapore stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether OUE Commercial Real Estate Investment Trust is a laggard or leader relative to its real estate sector peers. Check out our latest analysis for OUE Commercial Real Estate Investment Trust
What’s the catalyst for OUE Commercial Real Estate Investment Trust’s sector growth?
Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw negative growth of -4.80%, underperforming the Singapore market growth of 7.92%. OUE Commercial Real Estate Investment Trust lags the pack with its negative growth rate of -25.97% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with OUE Commercial Real Estate Investment Trust poised to deliver a -20.73% growth compared to the industry average growth rate of -9.90%.
Is OUE Commercial Real Estate Investment Trust and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 16x, relatively similar to the rest of the Singapore stock market PE of 14x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 7.02% on equities compared to the market’s 7.94%. On the stock-level, OUE Commercial Real Estate Investment Trust is trading at a PE ratio of 16x, which is relatively in-line with the average REIT stock. In terms of returns, OUE Commercial Real Estate Investment Trust generated 3.99% in the past year, which is 3% below the REIT sector.
What this means for you:
Are you a shareholder? OUE Commercial Real Estate Investment Trust is a REIT industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If your initial investment thesis is around the growth prospects of OUE Commercial Real Estate Investment Trust, there are other REIT companies that are expected to deliver higher growth in the future, and perhaps trading at a discount to the industry average. Consider how OUE Commercial Real Estate Investment Trust fits into your wider portfolio and the opportunity cost of holding onto the stock.