YueXiu REIT is the first HKEX-listed REIT to invest solely in properties situated in China. As of 4 May 2019, YueXiu REIT’s market capitalisation stands at HK$ 16.7 billion. In this article, I’ll bring a detailed account on the REIT’s growth story for the last 10 years, its latest financial results, and valuation figures.

Thus, here are 10 things to know about YueXiu REIT before you invest:

  • Original Portfolio in 2009
    In 2009, YueXiu REIT has five properties in its portfolio. White Horse, at that time, was the REIT’s anchor property as it accounted for 57% of its total revenue in 2009. The other 43% of the REIT’s revenue were evenly contributed by the other four properties. The breakdown of revenue of YueXiu REIT for 2009 is as followed:




No.


Properties 2009
Revenue 2009(RMB Million)Revenue 2009(%)
1White Horse Building, Guangzhou268.157.2%
2Fortune Plaza, Guangzhou54.511.6%
3City Development Plaza, Guangzhou50.010.7%
4Victory Plaza, Guangzhou45.79.7%
5Neo Metropolis, Guangzhou50.710.8%
Total Revenues in 2009469.0100.0%



For the last 10 years, they collectively have delivered consistent growth in revenues. It increased from RMB 469.0 million in 2009 to RMB 650.4 million in 2018.

Source: YueXiu REIT’s Annual Reports

  • Acquisition 1: Guangzhou International Financial Centre (IFC)
    As of 9 October 2012, YueXiu REIT had acquired the Guangzhou IFC for RMB 8.85 billion. It is a commercial complex which consists of Grade A offices, retail mall, hotel, and serviced apartments. Guangzhou IFC had delivered consistent growth in revenues, up from RMB 807.1 million in 2013 to RMB 1.11 billion in 2018. As of 31 December 2018, Guangzhou IFC reported a 96.4% in occupancy rate.


Source: YueXiu REIT’s Annual Reports

  • Acquisition 2: YueXiu Tower
    As of 1 September 2015, YueXiu REIT has acquired the YueXiu Tower for RMB 2.63 billion. It is a commercial complex located in Shanghai. In the last 3 years, YueXiu Tower had contributed stable growth in revenues. It increased from RMB 136.1 million in 2016 to RMB 142.8 million in 2018 and thus, is the third biggest contributor of income to the REIT. As of 31 December 2018, YueXiu Tower reported a 97.3% in occupancy rate.


Source: YueXiu REIT’s Annual Reports

  • Acquisition 3: Wuhan Properties
    As of 21 December 2017, YueXiu REIT acquired 67.0% stakes in Wuhan Properties, which comprise of Grade A offices, retail mall and car parks situated in Wuhan for RMB 2.28 billion. It contributed as much as RMB 126.4 million in revenues in 2018. As of 31 December 2018, the Wuhan Properties has reported a 75.4% occupancy rate.


  • Acquisition 4: Hangzhou Victory Business Centre Tower 2 (HVBCT2)
    In December 2018, YueXiu REIT has completed two transactions. These include the acquisition of HVBCT2 for RMB 590 million and the disposal of Neo Metropolis for RMB 1.18 billion.


  • Portfolio Valuation in 2018
    As such, YueXiu REIT has expanded its portfolio valuation to RMB 33.97 billion in 2018 from RMB 5.08 billion in 2009. Guangzhou IFC is YueXiu’s biggest real estate, accounting for 54% of the REIT’s portfolio valuation. Here is a breakdown of YueXiu’s portfolio valuation for 2018:


Source: YueXiu REIT’s Annual Reports


No.

Properties 2018
Valuation (RM Million)Valuation (%)
1Guangzhou IFC, Guangzhou18,36654.1%
2White Horse Building, Guangzhou5,06114.9%
3Wuhan Properties, Wuhan3,68510.8%
4YueXiu Tower, Guangzhou3,1499.3%
5Fortune Plaza, Guangzhou1,1973.5%
6City Development Plaza, Guangzhou9752.9%
7Victory Plaza, Guangzhou9362.8%
8HVBCT2, Hangzhou6011.7%
YueXiu REIT’s Total Portfolio Valuation33,970100.0%

Source: YueXiu’s Annual Report 2018

  • Financial Results
    YueXiu REIT has delivered growth in revenue, distributable income and distribution per unit (DPU) for the last 10 years. It is largely contributed by its acquisitions of investment properties and stable growth achieved by its existing properties in its portfolio. Revenue had grown from RMB 469.0 million in 2009 to RMB 2.03 billion in 2018. Distributable income had increased from RMB 222.0 million in 2009 to RMB 849.5 million in 2018. It had led to growth in DPU from HK$ 0.216 in 2009 to HK$ 0.320 in 2018.


Source: YueXiu’s REIT’s Annual Reports

  • Balance Sheet Strength
    Presently, its gearing ratio is 38.7%.

    As of 31 December 2018, YueXiu REIT has total borrowings of RMB 13.9 billion and total assets of RMB 35.8 billion. Presently, its borrowings are denominated in the following currencies with its effective interest rates as followed:



No.

Denominated in Currencies:
Amount (RM Million)Effective InterestRates (%)
1Hong Kong Dollars8,6243.65%
2U.S. Dollars2,7304.99%
3Renminbi2,5214.31%
YueXiu REIT’s Total Borrowings13,876n/a

Source: YueXiu’s REIT’s Annual Report 2018

  • P/B Ratio
    As of 4 May 2019, YueXiu REIT is trading at HK$ 5.39 an unit. In 2018, it has reported net assets of HK$ 5.41 an unit. Hence, it has a current P/B Ratio of 0.996, which is higher than its 10-year average of 0.763.


  • Gross Dividend Yields
    In 2018, YueXiu REIT has paid out HK$ 0.32 in DPU. As such, its current gross dividend yield is 5.94% a year, which is below its 10-Year average of 7.09% per annum.


VIA’s Verdict

YueXiu had expanded its portfolio and hence, was able to deliver consistent rise in revenues, distributable income and DPU over the past 10 years. As a result, it had experienced growth in stock price, leading to a rise in market capitalisation from HK$ 3.1 billion in 2009 to HK$ 16.7 billion presently.

Source: Google Finance

At current valuations, YueXiu REIT is trading at:

– P/B Ratio: 0.996 (above average)

– Current Dividend Yield: 5.94% (below average)

So, would you invest in YueXiu REIT? Please leave your comments below.

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