Opportunity for LION-PHILLIP S-REIT?

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It was recently announced that Singapore REIT ETFs are no longer subjected to 17% corporate tax on their S-REITs distributions. This will apply from 1 July 2018 onwards. (http://www.businesstimes.com.sg/government-economy/singapore-budget-2018/singapore-budget-2018-tax-transparency-to-apply-for-s-reit)

There are 3 REIT ETFs listed in SGX:

  1. PHIL AP DIV REIT S$D (BYJ.SI)
  2. NikkoAM-STC Asia REIT (CFA.SI)
  3. LION-PHILLIP S-REIT (CLR.SI)

The LION-PHILLIP S-REIT etf stands to benefit the most as their universe are only S-REITS. The other 2 ETFs have Australian REITs that still have to pay 15% withholding tax of the DPU paid.

LION-PHILLIP S-REIT pays dividends 2x a year, and will have their first XD on 2nd Mar 2018. At the current price, their dividend yield is expected to be 4.6% after tax and management fee.

With the new change, will their future dividend yield be 4.6% x 1.17 = 5.38%? When will their DPU be boosted to reflect the new tax laws? I called Lion-Phillip today, but the staff could not answer me, but they did promised to get back to me.

Meanwhile, the stock price has not moved much since the government announcement.

I have also checked if the price movement makes sense by comparing with the FTSE SREIT index.

The price movement looks sound. Price has corrected recently to $1.024, which is quite close to the IPO price of $1.0.

To know what the LION-PHILLIP S-REIT consist of, please read my past post: http://wealthlions.com/2017/10/analysis-phillip-lion-etf/

Before you invest, please understand what you are buying by reading the ETF details first: http://www.lionglobalinvestors.com/en/funds/lion-phillip-s-reit-etf/index.html#library?fcode=LEPF&fname=Lion-Phillip%20S-REIT%20ETF

Note that LION-PHILLIP S-REIT

  • cannot be bought using CPF
  • can be bought using SRS
  • can be bought using Maybank Kim Eng margin account financing at 2.88% at 70% loan to value ratio.

Assuming that the dividend yield is at 5%, using $10,000 to buy $20,000 worth of LION-PHILLIP S-REIT, and financing $10,000 at 2.88%, the net supercharged return is about 7.1%.

If you’ll like to know more about using a stocks margin account to safely supercharge your yield, please contact me.

And by the way, even with the lack of clarity from Lion-Phillip, I plan to nibble a bit of LION-PHILLIP S-REIT using my margin account tomorrow, depending on how the market moves.

  • I'm a remisier with Maybank Securities, and as a bonds and REITs investor myself, I guide my clients to build resilient bonds and REITs portfolios. If you like to be guided, please open a trading account to become my client; It's free!