StockTalk(7.3): Chinese S-REITs & trusts in Singapore facing challenges
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Chinese REITs and trusts listed in Singapore are facing financial challenges. EC World REIT $EC World Reit(BWCU.SG$is unsure about its ability to continue as a going concern due to current liabilities exceeding assets by $234.1 million. At the same time, Dasin Retail Trust $Dasin Retail Tr(CEDU.SG$ experienced a decrease in fair value by 16% due to poor market performance and lower rental rates.
The decrease in Dasin Retail Trust's portfolio valuation by 23% to $1.8 billion was due to poor property market performance and the weakening of RMB as the investment properties are denominated in RMB. The above reasons led to breaches in financial covenants, including gearing ratio, interest coverage ratio, and loan-to-valuation ratio, which the trust is obliged to maintain under its offshore facilities as announced on April 24, 2023. Managers are seeking waivers from lenders to restructure and reschedule debt obligations.
How do you perceive the recent market performance of S-REITs? Are you currently invested in any particular S-REIT or planning to invest in the near future?
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Kopikarp : In the past, I made an investment in Midas Holdings, an S-chip listed on the Singapore Exchange (SGX). Drawn in by its seemingly robust financial statements and promising position in the Chinese railway industry, I, like many other investors, failed to foresee the looming disaster. In 2018, Midas shocked the market by revealing severe liquidity issues and defaulting on loan obligations. This led to its eventual suspension and liquidation, and substantial financial losses for shareholders, myself included.
This painful experience taught me the importance of thorough due diligence and not to overly trust financial statements. Likewise, other investors should be cautious when considering S-chips, including REITs. Several high-profile cases such as China Sun Bio-chem Technology and FerroChina have been mired in financial irregularities. Even S-REITs, such as Eagle Hospitality Trust, have faced issues due to mismanagement, leading to significant investor losses.
Overall, while S-chips may offer an avenue to tap into China's high-growth economy, they come with too many potential hazards; around one third of all S chips were also in negative equity. Thorough scrutiny of the company's governance, operational track record, and management credibility is paramount. Or, you can take the easy way out by avoiding them altogether.
ZnWC : I think some may have a misconception that Chinese S-REITS are referring to property in China. It is referring to property in Singapore but targeting on Chinese foreign buyers or tourists. With the opening of travel, it makes sense that such businesses should strive.
But there are risks. First China's economy is facing recession or worse stagnation which implies the buying power of Chinese is weakening. Second China ageing and shrinking population will discourage people to save more than spend more.
The positive side is China government is lowering interest rate to encourage spending and introduce stimulus package to targeted sectors to revive the economy. Hence I'll wait and see before investing in Chinese S-REITS.
Biggy168 : I totally agreed with Kopikarp, look at all those Chinese stks listed in SGX, all hv melted and gone with the wind without any traces of ashes, like China Fishery, n other Chinese companies, my lost was painful too.... They never look good in Singapore. I rather buy from the China mkt than those listed in SGX.
102765799 : the China economy remains tepid and unable to mount a recovery.. all related stocks including reits will take some time to recover, but the Chinese government would unlikely do nothing in near future
No_Horse_Run_4896 : China economy remain uncertain, ups and downs still largely depend on what Mr Xi thinks
Giovanni Ayala :
