by: Dean Goh
All examples and stocks quoted here in this article and on the ProButterflyTM and REITScreenerTM site are for learning purposes; it does NOT constitute financial advice or a Buy/Sell recommendation. Contents are reflective of personal views and readers are responsible for their own investments and are advised to perform their own independent due diligence and take into account their own financial situation. If in any doubt about the investment action you should take, you should consult a professional certified financial advisor.
Since plunging to a low of HKD 1.65 a few months after its IPO listing in 2007, Fortune REIT (“Fortune”) has risen steadily to a high of HKD 10.04 at the end of 2016 (a more than 500% increase). However, just last month, Fortune hit a new low of HKD 8.56 since more than a year ago. Fortune has consistently traded below its fair value, and its current trading price (at point of writing) HKD 8.86, makes Fortune an even more undervalued stock.
At first glance, Fortune is an attractive stock to snap up. It boasts steady growth over the past 5 years in the key areas of DPU, NAVPU and NPI. Further, it has a very low gearing ratio at 27% and a healthy interest cover at 5.60 for FY 2017. Thus, it would be apt to look at the risks Fortune REIT may be exposed to going forward.
Fig. 1: SGD to HKD chart
Fig. 2: Tenant Makeup of Fortune’s retail malls
The achievements of Fortune REIT are well-known - high occupancy rates, positive rental reversions et cetera. So this article skips that. This article merely presents the future traps Fortune might fall into for prospective and current investors of Fortune to take note of, amidst the glitzy figures for Fortune. Such risks are influenced largely by uncontrollable global conditions and are often more unpredictable than President Trump’s personality. Thus, it’s good to get a better grasp of such uncertainties by being periodically updated by global news channels.
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