National Day Special Offer! Since May 2021, ESR REIT share price staged a rebound following acquisition of a 10% stake in ESR Australia Logistics Partnership (“EALP”), which is 80% owned by Singapore sovereign wealth fund, GIC. For a long time, I have been following developments of industrial S-REITs that are majority-owned by Temasek Holdings, such as Ascendas REIT and Mapletree Industrial REIT. The recent bullish form of ESR REIT share price led to an SG Wealth Builder member requesting for a coverage on this counter.
Singapore has two sovereign wealth funds – Temasek Holdings and GIC. While Temasek Holdings has stolen the limelight through its various investments in finance, industrial, technology and commodity firms, GIC tends to form partnerships with private equity firms to invest in overseas real estate assets. The recent aggressive moves by GIC to acquire industrial assets with ESR could have a major bearing on ESR REIT share price in the years to come.
Before touching on the outlook of ESR REIT share price, let’s cover some background on this industrial S-REIT. The sponsor of this S-REIT is ESR, which was formed in 2016 through the merger of Japan’s Redwood Group and Chinese e-Shang, co-founded by private equity firm Warburg Pincus in 2011. For this reason, ESR stands for e-Shang Redwood. ESR was listed in Hong Kong stock market in 2019 and GIC owns 5.06% stake as of 31 December 2020.
Local investors may not have heard of ESR REIT prior to 2017. This is because the sponsor (ESR) formed the S-REIT through a “back-door” approach. In January 2017, ESR acquired an 80% stake in the former Cambridge Industrial Trust, which was sold by National Australia Bank and Oxley Global. Following the acquisition, ESR rebranded Cambridge Industrial Trust to ESR REIT.
Usually, I am cautious of S-REIT with foreign sponsors, especially those that I have never heard of. This is because it is difficult for Singapore retail investors to assess the strength of the foreign sponsors and the financial health of the real estate assets in foreign countries. The collapse of Eagle Hospitality Trust validated the importance of choosing an S-REIT with a strong sponsor. However, ESR REIT could be an interesting investment because most of the underlying industrial properties are located in Singapore. As at 30 June 2021, ESR REIT holds interest in a diversified portfolio of 58 properties located across Singapore, with a total gross floor area of approximately 15.6 million square feet and an aggregate property value of $3.2 billion.
With Price/Book Value of just 1.01, ESR REIT share price is trading at just its book value. Assuming that the full-year DPU is 3 cents, the annualised DPU yield is estimated to be 6.8% based on current ESR REIT share price. The current value of ESR REIT share price, coupled with the attractive DPU yield, make this counter an interesting one to invest in. In this article, I will share my analysis of ESR REIT share price.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am not vested in ESR REIT at the moment. Whether ESR REIT share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
ESR REIT share price to rock with GIC?
In recent years, ESR REIT share price attempted to dethrone Frasers Logistics and Commercial REIT, Ascendas REIT and Mapletree Industrial REIT in the industrial REIT space. In 2018, ESR REIT merged with Viva Industrial Trust. And then in December 2020, ESR REIT tried to merge with Sabana REIT unsuccessfully. Unexpectedly, activist fund Quarz Capital had torpedoed the deal. Despite the setback, things could really shake up for ESR REIT share price with Singapore’s sovereign wealth fund GIC entering into the picture.
Amid the pandemic, GIC has bizarrely[This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]National Day Special Offer!
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