Iggy's Journal: UOB Called REITs Calm. One REIT's Gearing Says Otherwise.
Iggy's Journal: UOB Called REITs Calm. One REIT's Gearing Says Otherwise.
17 Sep AM (for you) 16 Sep PM (for me)
Podcast Release
Same broker note, same day, two very different calls. UOB Kay Hian downgraded DBS to Sell and OCBC to Hold on an oil shock, then turned around and called S-REITs an oasis of calm. That phrase is doing a lot of work, so I went and checked one REIT's actual numbers instead of taking the label at face value.
The Numbers
Boustead REIT is where the calm-versus-scared framing gets tested. Gearing sits at 36.4 percent, a real miss against my own 35 percent threshold. But interest coverage comes in at 5 times against my 4 times floor, comfortably offsetting the gearing miss rather than compounding it. Occupancy is strong at 98.1 percent with a 5.4 year lease runway, and forward yield estimates cluster somewhere between 7 and 9 percent. I'm not treating that yield range as confirmed since this REIT only listed in March and has no trailing payout history yet.
My Personal Take
Rising bond yields are supposed to punish REITs through financing costs, that mechanic hasn't changed just because a broker used a nice phrase. What I think is actually happening is relative, not absolute: when banks start taking hits on an oil shock, a REIT with decent coverage and near full occupancy starts looking calmer next to them, even with a gearing number that would've bothered me on its own in a quieter week. While the rest of you are waking up in Singapore, it's time for me to go to bed in London. Good morning and goodnight!
📺 YouTube: https://youtu.be/8Nwgc0lAD14
📩 Substack: https://investingiguana.com/p/uob-kay-hian-just-called-reits-an
Not financial advice. Iggy's Forensic Compliance Standards apply.
Cheers, Iggy 🦖
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