IREIT Global (SGX:UD1U) is a SGD$476.27M 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. Below, I will examine the sector growth prospects, and also determine whether IREIT Global is a laggard or leader relative to its real estate sector peers. View our latest analysis for IREIT Global
What’s the catalyst for IREIT Global’s sector growth?
Issues around rate hikes and yield changes have made investors sceptical of REITs. The capacity for these investment vehicles to absorb a rate hike should be considered, hence, factors such as lease durations and pricing power in the market would require a deeper dive. Over the past year, the industry saw negative growth of -4.80%, underperforming the Singapore market growth of 7.92%. IREIT Global lags the pack with its negative growth rate of -12.52% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. However, the future seems brighter, as analysts expect an industry-beating , albeit negative, growth rate of -6.71% in the upcoming year.
Is IREIT Global 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, IREIT Global is trading at a PE ratio of 12x, which is relatively in-line with the average REIT stock. In terms of returns, IREIT Global generated 9.63% in the past year, which is 2.61% over the REIT sector.
What this means for you:
Are you a shareholder? IREIT Global’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given IREIT Global is trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto IREIT Global as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value IREIT Global based on its cash flows to determine if it is overpriced based on its current growth outlook.