When shopping, it’s common to be on the lookout for great bargains to fill up your grocery cart.
The same philosophy also applies to investing.
As a Smart Investor, you’d want to capitalise on juicy bargains to fill your investment portfolio with compelling investment ideas.
One method to identify such opportunities is to search through the list of stocks hitting their 52-week lows.
However, you need to determine if such stocks represent real bargains or value traps in disguise.
REITs’ unit prices are tumbling due to rising interest rates, while inflation has also raised the spectre of higher operating expenses.
Here are four REITs near their 52-week lows that you may wish to consider adding to your investment watchlist.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT that owns 21 data centres across nine countries worth around S$3.5 billion as of 31 March 2022.
The REIT’s unit price recently closed at S$2.07, just a tad higher than its year-low of S$2.06.
Keppel DC REIT had just reported its fiscal 2022’s first quarter (1Q2022) business update.
Gross revenue slipped 0.9% year on year to S$66.1 million while net property income (NPI) dipped by 1.4% year on year to S$60.1 million.
Distribution per unit (DPU) inched up 0.2% year on year to S$0.02466.
Annualised DPU stands at S$0.09864 and the REIT’s units offer a prospective distribution yield of around 4.8%.
Portfolio occupancy stood high at 98.7% while aggregate leverage came in at 36.1%.
The REIT enjoyed a low cost of debt at 1.8% and the interest coverage ratio (ICR) was high at 10 times.
Demand for data centres remains robust and continues to be driven by cloud computing and increased digitalisation.
Digital Core REIT (SGX: DCRU)
Digital Core REIT, or DCR, owns a portfolio of 10 data centres located in the US and Canada.
These freehold assets enjoy full occupancy and are valued at around S$1.46 billion as of 31 March 2022.
DCR’s unit price recently touched a 52-week low of S$0.925 and has recovered slightly to end at S$0.945.
The data centre REIT reported an encouraging set of financial numbers for 1Q2022.
Revenue came in at US$26.4 million, a tad lower than its forecast of US$26.5 million.
NPI, however, was around 7% higher than forecast at US$17.9 million due to lower than expected property expenses.
Distributable income was 1.9% higher than forecast at US$12.1 million.
However, DCR announced that its fifth-largest customer, a privately-held IT service provider, had filed for bankruptcy this month.
This customer remains current on its rental obligations and the REIT expects to backfill the capacity as the market conditions for data centres remain tight.
Sponsor Digital Realty Trust (NYSE: DLR) has also agreed to guarantee the cash flows in case of a shortfall, and this event should have no impact on DCR’s DPU.
EC World REIT (SGX: BWCU)
EC World REIT owns eight logistics properties located in the e-commerce clusters of Hangzhou and Wuhan in China.
The REIT saw its unit price plunge earlier this month to hit a 52-week low of S$0.63 over concerns that it could not refinance its loans.
The REIT manager has confirmed that the refinancing exercise is in its “final stages of negotiation” and its financial statements are prepared based on a going concern basis.
EC World REIT had reported a 14.4% year on year increase in gross revenue to S$125.5 million for its fiscal 2021 (FY2021).
NPI climbed 12.7% year on year to S$113 million while DPU increased by 16.9% year on year to S$0.06263.
At the REIT’s last unit price of S$0.66, its units sport a trailing distribution yield of 9.5%.
Dasin Retail Trust (SGX: CEDU)
Dasin Retail Trust owns a portfolio of seven retail malls located in Foshan, Zhuhai and Zhongshan cities in China.
The REIT’s unit price has plunged by close to 60% in one year and is trading close to its year-low of S$0.29.
Dasin’s auditor had flagged concerns over the REIT’s negative working capital position and questioned if the REIT could continue as a going concern.
The manager is in active discussions to refinance several loans that are due in July and September 2022 and has stated that nothing material has developed that warrants further disclosure.
For FY2021, the retail REIT had reported a 15.8% year on year increase in revenue to S$101.3 million.
NPI rose by 10.9% year on year to S$78.4 million, and DPU (without distribution waiver) surged 62.7% year on year to S$0.0467.
At the REIT’s last traded unit price of S$0.30, its trailing distribution yield stood at 15.6%.
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Disclaimer: Royston Yang owns shares of Keppel DC REIT and Digital Core REIT.
