Question 1: In the current economic climate, how do you assess whether non-office property trusts (A-REITS) represent good value? Taking Centuria Industrial REIT (CIP) as an example, it trades well below its NTA (net tangible asset value), having experienced a large fall in price over the last 6 months. I think the yield is about 7% unfranked.
Answer: I have been bearish about the property trust sector … higher bond yields impact interest expense, plus place pressure on capitalisation rates. Further, in the office sector, the post-Covid working environment will pressure rental income and ultimately valuations.
Industrial property trusts, such as CIP (Centuria Industrial Trust) are interesting. They had a great run during the pandemic, but have been hurt lately because of interest rates. Consider the NTA, gearing, WALE (weighted average lease expiry) and how recently it’s been valued. Also check the broker forecasts (as a group, the analysts are pretty good with property trusts).
With CIP, the NTA as at 30 June is $4.24, significantly higher than the ASX price of $3.01. Broker target price is $3.52. Company distribution guidance for FY23 has been cut to 16c per unit – an interesting, but relatively uninspiring yield of 5.3% (unfranked).
I can’t get excited about the yield. I note, however, that in its review of its FY22 results, Ord Minnett described CIP as follows: “Centuria Industrial REIT remains the best pure-play exposure to Australian industrial assets on the ASX”.
Question 2: A couple of weeks back on Boom, Doom and Zoom, you mentioned an ETF that invests in global healthcare stocks. Is this listed on the ASX, and if so, what is the code?
Answer: Yes, it is iShares Global Healthcare ETF, which trades under the ticker IXJ. The top holdings include United Healthcare, Johnson & Johnson and Pfizer.
Question 3: The Hang Seng is having a correction. Do you think it’s time to jump in on a China ETF, like IZZ or MCHI or is there anything else on the HSI that you like?
Answer: The Hang Seng is down about 10% over the last month. In comparison, the ASX 200 is almost flat, while the Dow Jones and NASDAQ are up 4.5% and 7.4% respectively.
Driving the performance of the Hang Seng are concerns about the slowing Chinese economy, plus the heightened tension between China and Taiwan and the west.
To invest in the Hang Seng, I think you have to be pretty comfortable with ‘China’ country risk. This is an ‘uncontrollable’ factor for me, so China is not high on my investment radar.
By all means, jump into the ETFs. The “thrill-seeker” would probably go directly… Tencent, Alibaba etc.
Question 4: CBA has declared a fully franked dividend of $2.10 per share. What is the last date that I can buy CBA shares to receive them? I assume it will be fully franked?
Answer: CBA’s final dividend of $2.10, which is fully franked, will be paid on 29 September. It will trade ‘ex-dividend’ from Wednesday 17 August, meaning that the last day you can buy shares and will receive the dividend is Tuesday 16 August. If you want to change your DRP (dividend re-investment plan) elections, you can do this up to COB on Friday 19 August.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
