Should You Invest In BHG Retail REIT [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of BHG Retail REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To March 24

Business Description

BHG Retail REIT is a retail REIT that was listed in 2016 and owns 6 Retail properties in China.

What I Like About BHG Retail REIT:

What I Do Not Like About BHG Retail REIT:

The counter is extremely illiquid
The underlying land lease is low and will be expiring around 2042 to 2048
Capital management strategy is questionable as the majority of the financing is denominated in SGD despite operations being 100% in RMB. This exposes the group's performance to unnecessary FX risk and also the inability to take advantage of the lower interest rate in mainland China.

Updates From Recent Performance (FY 2023)

General Comments:

The occupancy rate remained resilient and the weighted average lease expiry remains decent
Property portfolio valuation remained steady in RMB but is not spared by the FX losses as a result of the strengthening of SGD against a weakening RMB

Positive Headwinds:

Negative Headwinds:

According to the financial statements, the consolidated interest coverage ratio of the group was 1.8 times, which was lower than the debt covenant ratio of 2.0 times required by the banks. The group obtained a waiver at the moment but if the situation worsens, this may open the counter up to a potential issue for refinancing of which a large chunk of their debt is due in the next 12 months.

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- Work In Progress -

Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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