ETF Background
The SRT is an investment product that provides investors with exposure to a diversified
portfolio of Real Estate Investment Trusts (REITs) listed across Singapore. It closely replicates
the performance of the iEdge S-REIT Leaders Index. SRT was established in 2021 and
comprises 22 securities with a market cap of S$69 mn as of 12 June 2024.
Investment Merits
• Investors gain the opportunity to participate in the potential income and capital
appreciation generated by the Singapore markets, offering convenient and efficient
access to this segment of the real estate sector.
• Sustainable income over the years (Figure 2). SRT dividends have been steadily increasing
since its IPO, currently maintaining around 5 to 6 cents.
• The book value of the ETF has become more attractive over the last two years (Figure 6).
It historically traded at a high of 1.2x price to book but now trades at a 5% discount to
book.
ETF Benchmark
SRT replicates as closely as possible the performance of the iEdge S-REIT Leaders Index, which
is designed to track the performance of REITS in Singapore. All eligible companies must meet
a minimum Average Daily Traded Value of US$500k, and existing constituents must meet a
minimum average daily traded value of US$400k.
Valuation
Dividend Yield Spread valuation
Dividend Yield measures the annual value of dividends received relative to the market price per
unit of the ETF. To value SRT, we will use the average dividend yield spread to a 10-year bond
(Figure 4). Since its inception, SRT has had an average 2.49% spread to a 10-year bond. The
current spread is 4.03%.
We value SRT at S$0.93 using a 2.49% dividend yield spread.
To determine the range of valuations, we applied a 5% and 10% discount and premium to both
Dividend Yield Spread and Forward Dividend (Figure 1). At the bottom end of our valuation
range, with a 10% higher projected dividend yield spread and a 10% lower forward dividend,
the ETF price is S$0.80 (Figure 1). At the top end of our valuation range, we use a 10% lower
projection of Dividend Yield Spread and a 10% higher Forward Dividend, and the ETF price is
S$1.06.
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Helena covers Hardware/Marketplaces/ETF. Helena graduated with a master degree in Financial Technology from Nanyang Technological University