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23 High Dividend REITs in One ETF: Lion-Phillip S-REIT (+Comparison)

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Singaporeans love property investment and passive income

It is of no surprise that Singapore REITs became one of the most popular investment products in recent years. 

With little capital, any investor can become pseudo landlords and collect dividends, without having to manage the properties.

But investors also realise the complexity of analysing individual REITs and having to deal with rights issues that come along once in awhile, which leaves them wondering if they should subscribe or risk diluting their shareholdings.

Seeing an opportunity in the REITs investing scene, ETF providers have listed 2 REIT ETFs recently. Now, the third one is in the midst of listing.

This article sheds some light into the latest, up and coming REIT ETF; Lion-Phillip S-REIT. Plus, we compare it with the existing REIT ETFs.

What Is Lion-Phillip S-REIT ETF

Lion-Phillip S-REIT (SGX:CLR) is the first and only local-focused REIT ETF in Singapore. It is jointly launched by Lion Global Investors and Phillip Capital Management.

What differentiates Lion-Phillip S-REIT from its two predecessors; Phillip SGX APAC Dividend Leaders REIT ETF and NikkoAM-StraitsTrading Asia ex Japan REIT ETF, is that it is the only S-REIT ETF without overseas exposure.

Lion-Phillip S-REIT ETF

Phillip APAC SGX REIT ETF

Nikko AM Asia Ex Japan REIT ETF

Singapore – 100%

Australia – 53.5%
Singapore – 29.3%
Hong Kong – 15.2%

Singapore – 60.5%
Hong Kong – 23%
China – 7.7%
Malaysia – 5.6%
Indonesia – 3.3%

Table 1: Geographical Diversification of the REIT ETFs in Singapore

Who Should Invest

According to the Fund Brochure, investors will benefit from:

Low-cost Easy Access to High-quality S-REITs — Instead of purchasing each REITs individually which may incur more brokerage fee. Investors only need to pay a single commission fee to buy the ETF. Investors also need not worry about corporate actions like right issues.

23 High-quality S-REITs in a Fund — Selected S-REITs are screened by Morningstar for superior quality and financial health. 

Sustainable Income Stream and Potential Capital Growth — Collecting dividend income and capital gain which is reflected on the increasing ETF unit prices. 

Diversification of Portfolio Risk — Security risks are diversified to over a portfolio of 23 REITs.

Factsheet

Fund Name

Benchmark / Index

Lion-Phillip S-REIT ETF

Morningstar® Singapore REIT Yield Focus IndexSM

Manager

Lion Global Investors Limited

Sub-Manager

Phillip Capital Management (S) Ltd

Distribution Policy

Semi-Annual

Management Fee

0.50% Per Annum

Total expense ratio

0.60% Per Annum (max. for first two years)

EIP / SIP Classification

EIP / SIP Classification

Number of Index Securities

23

Rebalancing Frequency

Semi-Annual (June and December)

Single Security Maximum Weight

10.0%

How It Works

The S-REIT ETF tracks the performance of Morningstar® Singapore REIT Yield Focus IndexSM. The index follows a broad-based income strategy and selects Singapore REITs based on three core proprietary factors: Quality; Financial Health and Dividend Yield

Lion-Phillip S-REIT ETF also considers the underlying REITs liquidity when deciding the individual REIT weightage on its portfolio. 

The index will be rebalanced semi-annually (Jun & Dec), with a maximum weightage of 10% on a single REIT. 

How To Subscribe Or Buy Lion-Phillip S-REIT ETF

Application Period:

2nd – 17th Oct 2017

Listing Date:

30th Oct 2017

Subscription price:

S$1.00

Minimum Quantity:

1,000 units (Incremental of 1,000 thereafter)

Placement Fees:

0.1% or minimum S$10 (subject to 7% GST)

Allotment:

Full allotment

Regular Savings Plan:

Participating Dealers

Phillip Securities Pte Ltd, DBS Vickers Securities (Singapore) Pte Ltd, Commerzbank AG and UOB Kay Hian Pte Ltd

The Lion-Phillip S-REIT ETF has been launched on 30th Oct 2017.

The Initial Offer Period has already started on 2 Oct and will end at 17 Oct 2017. Before you are able to subscribe make sure you already have a CDP account and brokerage account.

Investors who want to participate on the offer must purchase through the Participating Dealers i.e DBS Vickers and UOB Kay Hian with an irrevocable form submission within the offering period. The money will be transferred at 18 Oct 2017.

The minimum quantity is set at 1,000 and subject to a minimum placement fees of $10 or 0.01% of the total units value.

Do note that the min. units of 50,000 units mentioned in the FAQ refers to Participating Dealers who purchase from Phillip Capital / Lion Global. As retail investors, we are buying from Participating Dealers; i.e min 1,000 units.

The Share Builder Plan program will be available on Nov 2017 onwards. This allows an investor to buy the units on a monthly basis with as little as S$100 per month. 

Since this is an issuance of ETF, there will be no limitation to the supply of the units as the ETF provider can simply create additional units to meet the demand. Hence, retail investors would get full allotment.

After Initial Offer Period

Investors who do not apply during Initial Offer Period can still purchase Lion-Phillip S-REIT ETF on 30 Oct 2017 when it is listed on SGX. They will be traded at a lot size of 100 units like stocks.

S-REITs ETFs Comparison

(Phillip SGX APAC Dividend Leaders vs NikkoAM-StraitsTrading Asia ex Japan vs Lion-Phillip)

Phillip SGX APAC Dividend Leaders REIT ETF

NikkoAM-StraitsTrading Asia ex Japan REIT ETF

Lion-Phillip S-REIT ETF

Index that ETF Tracks

SGX APAC Ex-Japan Dividend Leaders REIT Index

FTSE EPRA/NAREIT Asia Ex Japan Net Total Return REIT Index

Morningstar Singapore Reit Yield Focus IndexSM

Ticket Quote

BYI

CFA

CLR

No. of REITs

30

23

23

Management Fees

0.30%

0.50%

0.50%

Top 3 constituents

Link REIT (10.98%), Scentre Group (9.16%) & Westfield Corp (7.85%)

LINK REIT (9.96%), ASCENDAS REIT (9.7%) & SUNTEC REIT (9.56%)

CapitaLand Mall Trust (10.76%), CapitaLand Commercial Trust (10.25%) & Suntec REIT (9.89%)

Countries

Australia, Hong Kong, Singapore

Hong Kong, Malaysia, Singapore

Singapore

Dividend Yield Range
[Net of tax]

4% to 5%

4% to 5%

4% to 5%

Differences between the 3 REITs ETFs in Singapore

#1. Diversification — The Lion-Phillip S-REIT ETF is concentrated in Singapore REITs and hence lacks the diversification that the other two REIT ETFs offer. However, some local investors prefer Singapore REITs and would not mind investing in a basket of 23 local REITs.

A common feedback we've noticed from investors is that they do not like the large exposure to Australian REITs (53.5%) in Phillip SGX APAC Dividend Leaders REIT ETF. We all experience home bias, don't we?

Our view is that geographical diversification is necessary if one wants to lower his risk, because the property rental market may not be always rosy in Singapore. International property markets may perform better at times, and the overall returns should be smoother with a diversified portfolio.

#2. Fees — Phillip SGX APAC Dividend Leaders REIT ETF has the lowest management fee of 0.3% while the other two ETFs are charging 0.5%. ETF fees are generally low and it is a fair price even at 0.5%, so we won’t haggle on the difference. Some investors prefer to own the REITs directly and not pay this fee.

However, it is important to note that buying individual REITs requires more effort and an investor would be paying with time when doing research. Your man hours could be worth much more than the management fee in the end.

Also, an ETF would take away all the hassle of deciding what to do with a rights issue. An investor with little capital could also pay a small fee to achieve a diversified portfolio of REITs.

#3. Dividend Yield — The dividend yield of the REIT ETFs ranges between 4% to 5%. It is difficult to estimate with high accuracy because the individual REIT may change their DPUs along the way and affect the average REIT ETF yields. But we can have a high degree of confidence the yield should range between 4% to 5%. 

As most of the REIT ETFs are rather young, it would take some time before we can evaluate their actual dividend yields. It is too early to determine which has higher yield, and the difference would be minute even if it exists.

We cannot emphasize enough that past historical dividend yield is not indicative of future performance. Hence, an investor should not choose the ETF solely on the yield alone. It would be more prudent to consider the degree of diversification and fees mentioned above.

FAQ

Q: Is the Fund filed under an Excluded Investment Product ("EIP") immediately?

It is safe to say that yes, this fund is classified as an EIP.

This classification means that investors can efficiently use the capital and invest it via common stocks without having to complete the Customer Account Review (CAR) nor applying for an SGX Online Education Programme.

Q: Can investors use the Fund through the Supplementary Retirement Scheme (“SRS”)?

After the IPO, all the investors can easily apply for this fund with the help of their brokers or SRS operator via SRS.

However, during the IPO investors can only invest in it using cash. 

Q: Is this Fund part of the CPF Investment Scheme (CPFIS)?

No, the fund is not currently included in the CPFIS.

Q: What happens when there's a Rights Issue from the underlying REITs?

Right Issues will be managed by the Lion-Phillip S-REIT ETF Fund Manager. It's underlying index  is the Morningstar Singapore Reit Yield Focus IndexSM which adjusts for Rights. This means it is likely for Lion-Phillip S-REIT ETF to accept right issues in order to track its underlying index accurately. We think the manager would use part of the dividends collected to reinvest in the rights. However, we are not sure how the ETF Fund Manager would manage the fund, should there be insufficient cash to subscribe to the right issues. 

Tell Us What Do You Think?

We hope you now have a clear understanding what the Lion-Phillip S-REIT ETF is about.

So, tell us what do you think about this ETF: would you be investing or maybe you prefer to pick your own REITs for greater returns?

Either way, leave us a quick comment below.

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  • Hi, could you explain a bit further on the impact for the ETF holders if the REITS declare rights? Don’t quite understand impact – will there be dilution impact ie DPU drop? Thank you

    • We read that the index that the ETF tracks subscribes to the rights. To track it closely, the ETF should buy the rights too. The cash can come from the dividends that were collected and withheld in the fund. However we are not sure what would happen if the cash isn’t enough for rights subscription.

      • Great article! I recently took a look at REIT ETFs again after Budget 2018, but am still not a fan due to the high management fees, the way they deal with rights issues/preferential offerings, and the poor trading liquidity.

      • Just to add to this discussion on rights issue, I emailed the fund manager and they replied that they will take up their rights entitlement to prevent dilution, but they did not answer my query on where the funds will come from.

        The way I see it, there are 2 possible ways to fund this subscription:

        1. The ETF uses the cash that it has received from distribution, to subscribe for a rights issue. This however, would affect the distribution that you receive from the ETF for the quarter.
        2. The fund manager injects their own capital, in exchange for units, to subscribe for the rights issue. However, this seems awfully generous of the fund manager. Depending on the method of valuation however, it could potentially lead to abuse by the fund manager, to the detriment of unitholders (I assume also that further charges would be levied).

        Another problem is that all of this is ultimately discretionary by the fund manager. I trawled through their prospectus, website and other legal documents, but there is no mention of this policy anywhere. As a result, the fund manager is technically not legally bound to comply with this policy, although it seems that they will strive to do so.

        Related: http://financialhorse.com/reit-etf/

  • I will not in this reits etf
    With 30k I can invest on my own in the top 5 -8 reits in Spore,can attend agm egm to socialise n learn fr other inbvestors.free makan at 4 or 5* htls somemore.
    no need to pay yrly 0.5% mgt fees. over 10 yrs is 5%
    individual reits give higer yields to a high of 7%

  • hi there, thanks for putting this together.
    can i check, the part on “^Est. Dividend Yield [Net of tax]” of 4.8% means it is after deducting 17% withholding tax yes?

    what about the the management fee of 0.5%? How do we calculate that

    is it 4.8% – 0.5% = 4.3%?

    thank you

  • Hi,
    Putting other benefits like diversification and etc aside, if I compare the ETF with buying an individual REIT outright the impact on our return is both a 17% corporate tax and a 0.5% management fee. Correct?

    • REITs are tax-exempt instruments so they dont pay the 17% tax.

      But an ETF buying the underlying REITs are not extended with the tax incentives. Hence they have to pay the 17% tax in return.

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