Better Buy: Mapletree Commercial Trust vs. CapitaLand Integrated Commercial Trust

Invest - What Type of Singapore REITs Should You Buy

Author: Tim Phillips

September 9, 2021

Share this

In a period when stock markets look due for a correction, or maybe even a crash, it’s worth remembering that we should maintain a diversified portfolio.

One of the best ways to do that is to buy reliable blue-chip stocks. What we can include in this blue-chip bucket are real estate investment trusts (REITs).

It happens to be a fact that Singapore is an investor’s dream for solid REITs to invest in over the long term.

But obviously, you want to be invested in the right REITs that are growing consistently in terms of their unit price but also paying out a sustainably higher distribution per unit (DPU), or dividend.

Recently, my colleague Say Boon Lim talked about the potential of office REITs in Singapore given their cheaper valuations.

However, it should be noted that investors must have faith that office life will resume as normal in a post-Covid world before they think about buying office REITs.

Among the biggest office REITs are Mapletree Commercial Trust (SGX: N2IU) and CapitaLand Integrated Commercial Trust (SGX: C38U), also known as “CICT”. But which is the better buy for investors now?

DPU growth

For REIT investors, the growth of that DPU is of crucial importance. That’s because we want that tax-free income to keep flowing in and ideally, it should be higher year after year.

In its latest full-year which is FY2020/2021 (for the 12 months ending 30 June 2021) Mapletree Commercial Trust paid out a DPU of 9.29 Singapore cents.

Over the nine full years that it’s been listed, that means the REIT saw its DPU grow at a compound annual growth rate (CAGR) of 6.8% from the 5.27 Singapore cents it paid out in FY 2011/2012.

Meanwhile, CICT paid out a DPU of 10.91 Singapore cents for the trailing 12 months as of 30 June 2021.

In the similar 12-month period back in 2011/2012, CICT paid out a DPU of 9.4 Singapore cents meaning its DPU’s CAGR over the nine-year period was 1.7%.

Winner: Mapletree Commercial Trust

Total return

One of the key metrics that all investors should focus on is total return because it takes into account both the share price appreciation and the return that the dividend generates.

If we take a look at the total return over the longer term (say over the past 10 years) then we can better recognise which REIT is superior at generating long-term returns for shareholders.

Over the past decade, Mapletree Commercial Trust has generated a price return of 145.6% but when combined with its dividend it delivered a total return of 313.7%.

Meanwhile, over the past 10 years CICT units generated a price return of 10.2 while the total return adds up to 83%.

Winner: Mapletree Commercial Trust

Look at the numbers

Mapletree Commercial Trust clearly comes out on top given its superior DPU growth as well as total returns over the past decade.

While CICT might be more recognised, given it owns a range of shopping malls (due to the fact it used to be CapitaLand Mall Trust), it has lagged in terms of generating shareholder value.

It’s important for investors to focus on the returns profile and the DPU growth given the importance these two metrics have on creating long-term wealth.

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.