2 REITs are trading at 52-week lows: Are they bargains?

The REIT sector has been in turmoil since the start of this year with the FTSE REIT index falling by 13% year to date as the 10 year US treasury yield has been persistently above 4%.

With many REITs share price declining and the losses that investors incurred far outweigh the DPU collected, investors have to question themselves whether REITs still remain a dependable source of income for income investors.

REITs may not be investable now. However, it still remains a great asset class for trading opportunities. In this article, we filter out 2 REITs that are trading at 52-week lows

Mapletree Industrial Trust

Mapletree Industrial Trust (MIT) owns a diversified portfolio of properties used primarily for industrial purposes in Singapore as well as properties used primarily as data centres worldwide beyond Singapore.

For the full year 23/24, MIT reported net property income increase by 0.6% to S$521.0 million. DPU was down 1.0% to 13.43 cents. There were positive rental reversions across all property segments.

Gearing level is healthy at 38.7% with 84.6% of the borrowings hedged. Adjusted interest coverage ratio is healthy at 4.3 times. Though overall portfolio occupancy remains above 90% at 91.4%, there are a few concerns which investors need to take note of.

• The data centres portfolio in North America has been falling and is now at 86.2%. Investors need to keep a close eye on this as the US economy is slowing down.
• Business Park occupancy is at 80.9%. This is another red flag which may affect its DPU as more workers prefer to work from home.
• The Light Industrial Buildings has the worst occupancy at 52.1%. This is really bad and MIT should do something about it.

MIT has decline 13% year to date and its share price is near 52 week lows. Does MIT present potential bargain given its uncertainty in the occupancy in its portfolio of properties? You can view the REIT website here.

Elite UK REIT

Elite UK REIT (Elite) owns freehold properties located in town centres and near amenities and transportation nodes in the UK.

Its portfolio offers a stable government-backed income stream with over 99% of the gross rental income derived from the UK Government, backed by AA-rated sovereign credit strength. Its has a total of 150 properties in the UK.

For the first quarter ended 2024, Elite reported net property income of GBP4,377 million which 3.5% lower than first quarter 2023. DPU dropped by 21.2% to GBP0.67.

Even after the equity fund raising, gearing is still high at 41.5%. Interest coverage ratio is at 3.1 times which is also considered low.  Only 64% of the borrowings are hedged.

Despite the REIT manager touting about having full income visibility from Government leases, investors need to question themselves why the DPU has been falling since 2020 and why has the gearing ratio increased to a high of 47% as at 31 Dec 2023?

Elite share price has fallen more than 14% year to date and has fallen more than 60% for the past 5 years. The DPU collected cannot cover the drop in share price. Hence, investors need to consider carefully whether Elite is considered a bargain at current price.

You can view the REIT website here.

Conclusion

These are the 2 REITs that are trading at 52-week lows. However, investors has to do their own research before concluding that they are bargains.