Interest Rate impact

[Francis Lee]

Hi,

I would like to know the impact of interest rate increase on the dividend from S reit ETF.

Currently the dividend yield for S Reit is approximately 5.75% pa. what would be the yield if interest rate increase by 1% assuming that the Reits managers have not lock in the rate with the Banks.

thank you

[Research Department]

Hi Francis,

Thank you for engaging us on Stocksbnb. Using the individual REITs under our coverage as a proxy, for a 100bps increase in interest rate,DPU will decrease 1-3% based on current interest rate hedging status and 8-12% if assume totally unhedged. Of course this is assuming zero income growth.

Using a hypothetical example of a REIT w S$100mn assets, assuming NPI yield of 5.75% and gearing of 35% (S-REIT average), average cost of debt 3% (S-REIT average), you could be looking at net income ard S$4. 1% increase in IR would then increase financing costs by $0.35, which works out to about c.9% impact on net income.

If your S-REIT is yielding 5.75% now, a 10% impact would bring yield to about 5.2%.

Hope this helps. Thanks

[Francis Lee]

Awesome ..thanks for your help !!!

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