Sunday, September 2, 2012

Reit Rankings - Mad Stranger's scoring system

REITs has been a useful source of passive income for me. Today, REIT typically gives around 5-9% of yield per year. This yield is quite attractive if we compare the savings interest the local banks are giving. DBS/POSB is currently 0.05%. For example, if one place $1000 in a local bank account, he will only receive $0.50 in a year. However, if he had invested the same amount in a REIT, he would have received $50-$90 in a year. 

But with the wide range of choices, which REIT is the most attractive? I have chosen 3 factors to compare the different REITs. They are yield, price to book and gearing. I do agree that there are other important factors as well. For example, strength of sponsor or the occupancy rates. I excluded these as I felt that strength of sponsor is a little subjective and occupancy rates is directly linked to its yield. 

For simplicity, my scoring system will be limited to only 3 factors. I will be using data from to calculate the various scores.

The scoring breakdown will be as follows. Each factor will be between 0-3 points. The total score will be then added up and ranked by total score. In the event of tie, the one with the higher yield will be ranked higher.

1) Yield
Above 9%: 3 points
Above 7%: 2 points
Above 5%: 1 point

2) Price to book ratio
Below 0.9: 3 points
Below 1: 2 points
Below 1.2: 1 point

3) Gearing
Below 20%: 3 points
Below 30%: 2 points
Below 40%: 1 point

As of 31 Aug, First REIT is having a P/B of 1.258. This gives it a P/B score of 0. Its gearing is at 15.8% which gives it a gearing score of 3. Its yield is a 7.07% which is a score of 2. Adding the 3 scores up, we have 5 points.

Starting from Sept 2012, I will be posting on a monthly basis for the score comparison for the different REITs. 

It doesn't mean that if you see a high score for a particular REIT, you rush in to buy. The score system only serves as an indicator on how the REIT is with respect to its yield, P/B and gearing. The ranking is also heavily dependent on the accuracy of the data shown on , investors are advised to do your own cross checking. It is always prudent to do your own research before making any buys or sells.


Anonymous said...

Hi, can i asked how you get the NAV and P/B data?

Mad Stranger said...

Hi Anonymous,
NAV data are retrieved from This site gives a good summary on the REITs listed on SGX.

If you want to calculate this on your own, your can look at the financial reports for the REIT you are interested in and use the formula:
(total assets - total debts) / total units

For P/B, it is simply the
last done price / NAV