Phillip SGX APAC Dividend Leaders REIT ETF – A Panacea For Low Yield?

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Normally, I’m not an active blogger due to my day job, which requires me to dabble in technology and finance, but when an interesting piece of news comes across my desk, I can’t pass up the chance to write. In case anyone hasn’t heard the news yet, Phillip Capital has launched an IPO for a REIT ETF to be listed on the SGX, and from the product fact sheet, the ETF shall track a list of Asia-Pacific REITs, excluding Japan.


This is a dual-currency ETF, so you can choose to invest in it using US dollars or Singapore dollars, depending on your preference for currency. Personally, I would take the SGD one as the “investment goal” for this ETF is to hold a diversified portfolio of REITs that give out good dividends, and converting the various currencies from the REITs back to Singapore dollars makes this an attractive investment for me.

The total expense ratio is stated to be 0.65%, which is slightly more than double the fees for the STI ETF run by SPDRS, but on par with the CIMB ASEAN 40 ETF, so this isn’t so bad. I would think that “specialty” ETFs that list on the SGX in the future are most likely to start out with similar expense ratios, unless the ETF is tracking a super popular index like the STI, for example.

Taking a look at the index methodology, it appears simple, yet elegant – after meeting the basic requirements of market cap, traded value and a few other criteria, the REITs are ranked according to the amount of money from dividends, divided by the free-float units outstanding. This is no easy feat, as only the largest and most “open” REIT with at least 15 to 20% free-float units will be considered for the index. Therefore, there is a very low chance of a troubled REIT like Sabana being included into the ETF.


With an expected dividend yield of about 5%, I think it is a decent yield for this ETF, although some might be hard up for the relatively “low” yields as compared to some locally-listed REITs. However, contrary to what most people think, the higher the yield is, the more risky it is! So 5% isn’t really all that bad, it’s just how risk vs returns work.

The P/B ratio looks cheap, since it is a diversified portfolio. Using the P/E is a little harder to use for gauging the quality of a REIT, although it is useful to note that the portfolio has good “earnings” (more like rental income), and the ratio between the earnings to the price of the ETF is “cheap”, compared to the usual standards used for screening stocks of between 8 to 12, depending on the investor’s risk appetite.


Finally, given the large expanse of Asian-Pacific countries, it’s no surprise that Australia, Hong Kong and Singapore comes up tops in the list, as the three countries are considered more “developed” in terms of their REIT offerings and yield than other exchanges with listed REITs in the APAC ex-Japan region. It is thus expected that Australian REITs will make up most of the weightage in the index, as shown in the diagram above. Also, almost half of the index comprises of retail REITs, and this is quite interesting, as there is currently no ETF or REIT available on the SGX that has retail properties in Australia under it’s portfolio, to my knowledge.

With that said, a few of my friends commented that its riskier than what they can take for whatever reasons (short WALE, “not Singapore”, etc.), and they would prefer to invest in a Singapore-only REIT, or at the very most, a mostly Singapore-focused REIT. However, given the economic headwinds that we are about to experience, I think it is fair to consider “going overseas”, as I feel both the systematic risk in Singapore and diversification risk of investing into this ETF are about the same level at this point in time.

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