HListed in 2011, Hui Xian REIT is the first HKEX-listed REIT that invests in a diverse portfolio of real estate across China. As of 31 December 2018, Hui Xian REIT has properties located in four key cities with a total valuation of RMB 35.5 billion. In this article, I’ll update on its latest financial results and valuation figures.

Thus, here are 10 things to know about Hui Xian REIT before you invest.

  • Breakdown of Portfolio Valuation:
    The following is a breakdown of the valuation of Hui Xian REIT’s portfolio in 2018:


No.

Usages of Properties
Amount (RMB Million)% of Total Portfolio
1Retail14,35540.6%
2Offices14,97342.4%
3Apartments2,5707.3%
4Hotels3,1608.9%
5Basement2900.8%
Hui Xian REIT’s Total Portfolio35,348100.0%

Source: Hui Xian REIT’s Annual Report 2018

  • Retail:
    It derives income from its malls at Beijing Oriental Plaza and Chongqing Metropolitan Oriental Plaza which offers 219,000 sq. m. of retail spaces collectively. Overall, this segment had contributed rising revenues from RMB 959 million in 2012 to RMB 1.21 billion in 2018. Out of which, the segment had maintained its Net Property Income (NPI) at around RMB 900 million per annum for the last 7 years.


Source: Hui Xian REIT’s Annual Reports

  • Offices:
    It comprises of the office towers at Beijing Oriental Plaza (BOP) and the Tower at Chongqing Metropolitan Oriental Plaza (CMOP). 95% of office revenues were derived from BOP.


No.

Office Properties
Amount (RMB Million)% of Office Revenue
1BOP1,21794.8%
2CMOP675.2%
Hui Xian REIT’s Office Revenue1,284100.0%

Source: Hui Xian REIT’s Annual Reports

BOP comprises of eight Grade A Office Towers with over 309,000 sq. m. in gross floor area (GFA). In 2018, it has recorded an average occupancy rate of 95.9% with high quality multi-national corporations (MNC) as its tenants. They include:

Source: 2018 Annual Results of Hui Xian REIT

Overall, this segment has been a key growth growth to Hui Xian REIT. It has recorded higher revenues and NPI for the last 7 years. Revenue had increased from RMB 785 million in 2012 to RMB 1.28 billion in 2018. Its NPI grown from RMB 568 million in 2012 to RMB 955 million in 2018.


Source: Hui Xian REIT’s Annual Reports

  • Serviced Apartments:  
    It consists of 3 serviced apartments towers which have as much as 720 units of apartments at BOP. In 2018, it enjoyed average occupancy rate of 93.3%. Its revenue has grown from RMB 129 million in 2012 to RMB 170 million in 2018. This has contributed to an increase in NPI, up from RMB 60 million in 2012 to RMB 94 million in 2018.



Source: Hui Xian REIT’s Annual Reports

  • Hotels:
    It consists of four 5-star hotels such as:

    – Grand Hyatt Beijing at BOP.
    – Sheraton Chengdu Lido Hotel, Chengdu.
    – Sofitel Shenyang Lido, Shenyang (70% interests)
    – Harbour Plaza Chongqing, Chongqing.


    Revenues have fallen from RMB 775 million in 2012 to RMB 535 million in 2018. NPI dropped from RMB 297 million in 2012 to RMB 119 million in 2018. In 2018, Hui Xian REIT had undertaken some renovation works at Sofitel Shenyang Lido. Thus, it has contributed to the fall in revenues and NPI recorded by Hui Xian REIT’s hotel segment in 2018.



Source: Hui Xian REIT’s Annual Reports

  • Financial Results
    Overall, Hui Xian REIT has recorded stable growth in group revenue and distribution to unitholders. Group revenues have grown from RMB 2.65 billion in 2012 to RMB 3.20 billion in 2018. It has resulted in a growth in distribution to its unitholders, up from RMB 1.21 billion in 2012 to RMB 1.52 billion in 2018. It is because Hui Xian REIT’s growth in retails, office and serviced apartments exceeded the decline in its hotel division. The REIT’s distribution per unit (DPU) had maintained at RMB 0.27 over the last 4 years as it had enlarged its number of units issued which nullified the growth in distribution to unitholders during the period.


Source: Hui Xian REIT’s Annual Reports

  • Balance Sheet Strength
    As of 31 December 2018, Hui Xian REIT has total borrowings of as much as RMB 9.9 billion and total assets of RMB 46.2 billion. Thus, its gearing ratio is 21.5% and has capabilities to fund any investment opportunities if any arises in the future.


  • Who Owns Hui Xian REIT?
    CK Assets Holdings Ltd is the largest unitholder of Hui Xian REIT with as much as 32.4% in unitholdings as of 31 December 2018.


  • P/B Ratio
    In 2018, Hui Xian REIT has reported net assets of RMB 4.58 per unit. It’s a continuous decline from RMB 5.50 per unit in 2012 as a result of a fall in portfolio valuation during the period. The drop in net assets caused a fall in Hui Xian REIT’s unit price for the last 7 years.

    As of 7 May 2019, Hui Xian REIT is trading at RMB 3.34 per unit. Thus, it has a current P/B Ratio of 0.729, above its 7-year average of 0.680.


Source: Hui Xian REIT’s Annual Reports

Source: Google Finance

  • Dividend Yields
    In 2018, Hui Xian REIT has paid out RMB 0.265 in DPU. Hence, based on its current unit price of RMB 3.34, its dividend yield is currently 7.93% a year, which is below its 7-year average of 7.61% per annum.


VIA’s Verdict

Hui Xian REIT has recorded a decline in unit price since its IPO launch in 2011 as a result of consistent decline in net assets value per unit during the period. This had resulted in its current high dividend yield offerings of 7.93% a year today.

Although the asset quality of the REIT might be a risk going forward, at the right price, Hui Xian REIT might still turn out to be a profitable investment for investors looking for a good yield.

What do you think?: ‘Would you invest in Hui Xian REIT at RMB 3.34 a unit?’

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