Lion-Phillip S-REIT ETF (SGX: CLR) Review

Real Estate Investment Trusts (REITs) are very attractive stocks because they are known for distributing high dividend. However, investing in individual REITS is really risky, especially if you don’t understand the fundamental of the companies and review it periodically.

When I was in my twenties, I’ve had my fair share of mistakes. I bought plenty of individual REITS that had high dividend yield without trying to understand the company. It is an expensive lesson that I’m still paying up to today. My individual REITS are still in red (sob!).

Well, back then there wasn’t any S-REIT ETF, so even if I wanted to, I could not invest in a REIT ETF. That was the gap that Lion-Phillip S-REIT ETF tried to fill when they were launched in 2017.

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What is Lion-Phillip S-REIT ETF?

Lion-Phillip S-REIT ETF (SGX: CLR) is an Fund that tries to replicate the performance of the MorningstarĀ® Singapore REIT Yield Focus Index, which is an index designed by Morningstar Research Pte. Ltd. to screen for high-yielding (REITs with superior quality and financial health.

It is not a market-capitalisation-weighted index like STI ETF, which means that the proportion of the stock they hold doesn’t depend on the stock’s price and volume. Instead, the weight of each stock is determined through fundamental analysis. Each stock’s weight is limited to maximum of 10% of the total portfolio of the Fund.

At the time of writing, Lion-Phillip S-REIT ETF holds more than 20 REITS that are listed in Singapore Exchange (SGX). As the name suggests, this ETF is concentrated in Singapore.

Key Information

Below are some key information about Lion-Phillip S-REIT ETF.

  • Inception: 30 October 2017
  • Benchmark: MorningstarĀ® Singapore REIT Yield Focus Index
  • Manager: Lion Global Investors Limited
  • Base Currency: Singapore Dollars (SGD)
  • Listing: Singapore Exchange (Mainboard)
  • Trading Board Lot Size: 100 units
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Annual Reports and Half Yearly Reports

For ease of reference, here are all the links to download annual reports and half yearly reports from SGX website:

Expense Ratio

YearExpense Ratio (%)
2020TBA (Mar 2021)
20190.6
20180.59
Source: Annual Reports

Expense ratio is the expense of a Fund divided by the price. You want to invest in Funds that has the lowest expense ratio as possible, thus maximizing your gain.

The expense ratio of both SPDR STI ETF and Nikko AM STI ETF is about 0.3%. That means, Lion-Phillip S-REIT ETF is less efficient than STI ETF.

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Tracking Error

Year1 Year Tracking Error (%)
2020TBA (Mar 2021)
20190.5
20180.6
Source: Annual Reports

Tracking error is the difference of performance (return) between the ETF and the index it’s trying to mirror. You want to invest in Funds that has the lowest tracking error as possible.

The 1-year tracking error of both SPDR STI ETF and Nikko AM STI ETF is less than 0.3%, meanwhile the 1-year tracking error of Lion-Phillip S-REIT ETF is about 0.6%.

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Lion-Phillip S-REIT ETF Dividend

Here are all the dividend ever paid out by Lion-Phillip S-REIT ETF since 2018.

Ex DatePayment DateDividend RatePrice during Ex-dateYield on Ex-date
28 Jan 202126 Feb 2021S$ 0.0240S$ 1.1052.17 %
3 Aug 202031 Aug 2020S$ 0.0210S$ 1.0492.00 %
31 Jan 202028 Feb 2020S$ 0.0289S$ 1.1702.47 %
30 Jul 201930 Aug 2019S$ 0.0281S$ 1.1332.48 %
30 Jan 201904 Mar 2019S$ 0.0211S$ 1.0162.07 %
29 Aug 201828 Sep 2018S$ 0.0180S$ 0.9951.80 %
02 Mar 201816 Mar 2018S$ 0.0168S$ 1.0001.68 %
Source: SGX

Your dividend yield will depends on your buying price. For the sake of simplicity, assuming you buy the stock on its Ex-date, the annualized dividend yield is less than 5%. It’s certainly better than STI ETF, but not much.

Are you willing to take more risks in this stock (because REITS are inherently more risky than STI ETF) for a marginal increase in dividend yield?

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Target Price

Again, for the sake of simplicity, let’s take the latest 2 half-yearly dividend and divide it by your desired yield to get the target price.

If your desired dividend yield is 4%, then the target price is: (0.024+0.021)/4% = S$ 1.125.

If your desired dividend yield is 5%, then the target price is: (0.024+0.021)/5% = S$ 0.90.

If your desired dividend yield is 6%, then the target price is: (0.024+0.021)/6% = S$ 0.75.

Risks

As with any other stocks, investing in Lion-Phillip S-REIT ETF has its own risks. Here are the risks that I can think of:

  • All Singapore stocks with some global exposure. It’s called S-REIT for a reason. Most of the shares that Lion-Phillip S-REIT ETF hold have majority businesses in Singapore, but some shares have stakes in Australia, Hong Kong, China and Indonesia.
  • Interest rates volatility. One of REIT’s main expenses is interest rate. When interest rate rises, profit will be undoubtedly affected.
  • Shift in demand for space. The global events that happen in 2020 (social distancing, rising of e-commerce) may or may not affect the demand for retail and office spaces in the future. If it does, the performance of this ETF will be affected.
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Alternative Funds

If you’re not comfortable with Lion-Phillip S-REIT ETF for whatever reasons, here are some alternative funds you can consider:

How to Invest in Lion-Phillip S-REIT ETF

Here are several ways you can invest in Lion-Phillip S-REIT ETF:

My Personal Take

Personally, I love index funds, especially funds that give high dividend. It saves me the hassle of trying to pick the correct REITS (which I’m really bad at).

I am currently not investing in this fund, and I’m still waiting for the right price to enter.

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Featured image: Canva/Netfalls

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