WHAT to do when REITs prices are falling?

Hi, welcome to this new video. If you have not yet subscribed to this channel, please do it now. So you will be updated every time I upload a new video. Now what is the topic today we are speaking again about real estate investment trust that if you follow my channel you know is one of my favorite topics. And what happened recently in the Singapore market is that some REITs drop in price. You can see here an example Capita Commercial Trust and what I want to share with you in this video is what to do when the price drop because some people may think that is a good opportunity to buy more, some people may be afraid and they want to sell their shares. So what is the approach? How do you decide what to do in this situation? But before that let's have a look at some of the REITs that drop. So you see here Capita Commercial Trust, it went down in the last days and then we have Capita Mall, same thing, see a big drop and we are below the 200 moving average, the red line. And another one that actually I want to discuss with you in this video is Ascend US rate and the drop here was quite huge, right? It was trading around 320 and now we are at 290. Around 290. And when this situation happen you may feel bad if you own the shares and if you don't have the shares you may feel is a good opportunity to buy. Now if you watch one of my previous video I actually had shares of Ascenda street but I sold at around 286. It's quite interesting that we went back to this price more or less. Now what should you do in this case? Well the first thing I will do when I see something like that that is not I would say a normal drop. If you look at the history I will look at the news, see if I find something explaining this drop. Of course I don't believe on people that after things happen they tell you why. But in these cases there may be some kind of explanation. And so if you look online you find for example this article and they say that Ascendas REIT did this acquisition of US property so there was a right issue. So what is a right issue? When a REIT needs capital it will give to the shareholders some shares at a discounted price and what can happen after that is that the price drops. So if you look at the article they say that ascendance read the 1st of November, the price was 317 and then they wanted to to buy properties and then what happened? They give this 104, 16 right issue, meaning to say every other shares you have in you can get 16 shares and the price was 263. So it was a 17% discount. And after that happened, what was. What you can see in the chart here is that there was this big drop first, right here we are on 4th of November. So first a big drop and then there was another drop that if you look carefully is also associated with the dividend. And this is quite normal. There can be a drop when the dividends are paid. Like here for example. Not always, not always. But for example here it happened again, you see the price is here and then boom, it went down. Because when the dividends are paid, actually the stock price can be influenced by that. Now the question is what would you do in this case? Is it the right time to buy more? Well, the news is not so bad, it's just right issue. If you feel that the properties they buy are good to create value, then it may be a good opportunity. But the question is what to do? Do we just buy because the news was not so bad or do we have to consider something else? So I want you to focus on a few things at this point. First, the price was really going up. It was very, very overextended. I sold at 286, it reached like 220 or more. And you know, if you are buying REITs because you want to create a passive income portfolio and not for trading you, you should also look at the dividend yield. So how much do you get in terms of dividends considering the price? Now if you look here, this is the website that I use. I will put the link in the description to check the information about REITs. If you look at Ascendas REIT here, you will realize a few things. Currently the Dividend yield is 5.5%. Now usually when I buy I want to have at least 5.5. Here is just a little above my threshold. So it's still okay, but it's not really exciting. But there are other things I'm concerned. Number one, this second column is the gearing ratio. That is basically the depth they have. Usually I don't buy when it's above 36, but. But here we are already at 37.2. So this for me would be already a good reason not to buy the reit. But there is more. Currently the price over nav is 1.41. Now you know that I don't like to use just the price over NAV because I don't think is the Best way to determine if a REIT is over or undervalued is much better than the absolute valuation method that I explained in another video. But what I usually look at is this chart and again I will put this link in the description. All these are free resources. By the way. If you look at Ascend as REIT you realize that actually we are very close to the top. This is showing the price over NAV in the last year. So we are close to the historical maximum even though there was this huge drop in price. So what does it mean? It means that to me the REIT is overvalued, the gearing ratio is very high. So there are already two reasons not to buy. And on top of that, from the technical point of view, I will be happy if this drop is corresponding to some kind of support area. And it doesn't look to be the case. I mean the only thing that you can see here is that this level was tested here, but is a kind of drop that, you know, recently there was nothing around here and also is below all the moving averages. So what I mean is that given the situation, I don't feel that buying ascendance rate is currently a good idea. So what else would you do then? Well, let's look at the chart and see if in this sector there is something else because you ideally want to also diversify by sector. So we are in the industrial sector. And what I was looking at and actually I have to say I bought some shares is this REIT called EC Ward. Now if you look at the price over navigation is not undervalued like this or some other rate where the it's very low but is not as bad as Ascendance. So I would say is a kind of slightly overvalued. Right. And if you look here, EC Worth is actually giving a yield of 8.42. Currently that is much better than 5.55. The gearing ratio is 32.4 and this is something I'm happy because I want ideally less than 36. Whereas ascendance rate, remember is 37.2. Price over NAV we have just seen that is slightly overvalued. But if you look at the absolute value it's also below one that is good. What about dividends? Well, if you look at the chart of the dividends then you will see, well, the history is not so long as ascendance, but it's pretty stable. So it's fine. Because if you look at the chart here you will see that this REIT is the history is not as long as Ascendance. So the beginning was trading very illiquid. I will never enter if the chart is like that. But then it started to get more volume and then the chart becomes nicer. So now if you look at this, you see that there was a drop as well. But look at this. First we are here and then this blue line is the 50 moving average average. So here we are actually at this level. Now using the 50 moving average as a support, you can see here. And also the price was around this 0.72 area, but it never went down. I mean the low was here, 715, but it stayed above this area. So it's good. And also this, this law is associated with the dividends that as we said, can have a negative, temporary negative impact on the price. So in terms of chart, it looks better than Ascend as to me, at the same time, if you look at the ranges, you see the price here, the maximum was around 0.8, let's say, and here we are around 0.6970. So looking at the chart, it also seems that we are kind of in the middle. So it's a fair value, I would say. And what I really like is that the yield is quite high. Now there are also some concern compared to Ascendance is that the market cap is much smaller because you see this number 586 ascendancy is almost 9,000. So it means that is a smaller cap, so potentially more less stable, let's say. So what I did, I entered, yes, but I enter half position. And this is a technique I suggest you to employ as well. Because when you are investing and you want to buy REITs, because you want a good yield, you ideally want to buy when the price is low. So when there is a drop and you want to see some kind of support, that's right. At the same time, if you are buying when there is a drop, as you can see here, low can go lower, so the support can be broken and the price can keep going down. So what I usually do, I buy half position. Say you want to buy $10,000. Well, you can buy 5,000 first and then if you see that the support is strong and the price is going up, well, you buy the rest. Maybe slightly higher price, but it's still okay. But if the price is dropping, you can wait and then whenever there is the new support tested, then you can buy the rest. So you will have a better price. And I think it's a much safer strategy, especially when you are dealing with small cap rates like this. So that's what I wanted to share. I hope that you find this video useful and then it will give some insights on what to do when there is a drop in price and what is the approach to follow and and the strategy to employ when you are deciding between buying more shares or selling what you have. And this is something that can happen often because even something like ascendancy that was very stable and you have never seen a drop like that recently in the last, well, at least four years, things can happen, unexpected things can happen and will happen. So better if you know what to do when the time comes. Again, thank you for watching. Subscribe to the channel. Put a like if you like it, write me a comment if you have some questions and as usual, see you next time.