Can I check which is your preferred method for calculating interest coverage ratio for Reits?
There seem to be a few methods used such as using the Net Property Income, Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) as the numerator.
Also, from what I have read, the average spread for the S Reit index yield to 10 yrs sgd bond has been around 4 percent since 2002 (Do correct me if I am wrong). Do you all have an idea of the approximate standard deviation for this spread since 2002? Also, where can we find information for the recent average yield of the S reit index if it is available?
Thank you for your question.
We use a range of ratios to measure a REIT’s ability to meet its debt obligations. For the interest coverage ratio, we traditionally look at the earnings before interest and tax (EBIT).
It would perhaps be more meaningful if you look at the yield spreads post the global financial crisis (2010 onwards) instead. Spreads since then have averaged at 3.6%, with +/- 1SD at 4.2% and 3.0% respectively. Current yield spread stands at 2.8%.
– Tara Wong, Investment Analyst
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About :Guangzhi graduated from Singapore Management University with a Master degree in Applied Finance and from South China University of Technology with a Bachelor degree in Electronic Commerce.
About :Paul has almost 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.
About :Richard covers the Transport Sector and Industrial REITs. He graduated with a Master of Science in Applied Finance from the Singapore Management University. He holds the CFTe and FRM certifications and is a CFA charterholder.
About :Tara covers the REITs and Property sector. Previously a consultant advising listed companies on their investor relations strategy, Tara’s transactions experience includes high-profile M&As, IPOs and privatisations.
About :Zheng Jieyuan is a research analyst in Phillip Securities Research, focusing on the China and Hong Kong markets as well as China stocks listed in the US.