CPF is a compulsory savings and pension scheme for working Singaporeans and permanent residents.
The benefit of having your savings in CPF is the risk-free interest given.
Albert Einstein famously once said “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
CPF is essential as it can be used to help fund retirement, healthcare, and housing needs for Singaporeans and Permanent Residents(PR).
The Ordinary Account(OA)- It gives an interest rate of 2.5% You can use the money here to buy house, insurance, investment etc
The Special Account (SA)-. It rewards an interest rate of 4%. It is strictly for retirement.
While it is a good idea to let your money compound using CPF scheme, you can try to invest in blue chip companies that pay a higher interest rate. However, there are few caveats you should note.
First, investing carries risk. Second, you should have a game plan and do your due diligence. Thirdly, do not invest money you cannot afford to lose and this money should be set aside to grow over long horizon.
1. Ascendas REIT
I have written Ascendas reit as a stock suggestion in previous articles as I think it really is a great alternative to CPF.
Ascendas is diversified over different class of real estate. They own Industrial and Data Centres (DCs), Distribution Centres (Logistics) and Business Parks/Offices.
From Q1 earnings report, it has a healthy leverage ratio of 38%. Although portfolio occupancy has dipped slightly from 91.7% to 90.6% it is still stable and rental reversion has increased by 3%
Ascendas has a strong management team and keeps itself relevant by recycling it's assets. It will be divesting three logistics properties in Australia and complete it's 75% stake in Galaxis.
Ascendas being diversified internationally has a natural hedge against currencies and the overall outlook is positive. The US market is likely to rebound 6.4% while the Singapore economy is estimated to grow around 5%
If you were to buy Ascendas Reit at $3.00 your expected yield is 4.88%
Hence, a stable bluechip company like Ascendas is likely to generate a higher return with higher returns and share price appreciation.
2. Suntec REIT
Suntec REIT owns properties in Singapore, Australia and United Kingdom. It mainly owns offices and retail. One property most readers should know is Suntec City mall and the Convention & Exhibition Centre.
Suntec REIT has recovered well with the relaxation of Covid related measures and the easing back to offices. It also has new anchor tenants such as Don Don Donki and SuperPark.
Based on Q1 earnings, Net Property Income (NPI) increased 10.2% y-o-y. The Convention Centre has caused massive losses but was contained due to restructuring.
The occupancy rate for Singapore retail and office portfolio are 91.5% and 96.1% respectively.
The performance of the REIT is closely tied to the Covid situation. With the acceleration of the vaccination programme, two-thirds of the population would be vaccinated by Aug 9.
This paints a bright outlook for the REIT when there is more office crowd and increased footfall in it's mall. If international travel were to be allowed, we can expect it's performance to rebound. This is because the Convention Centre will be able to host many international conferences and events.
Suntec offers a dividend yield of 4.81% at a share price of $1.54 hence, this is another great alternative investment.
3. Starhill Global REIT
Starhill global REIT is comprises mainly retail properties in Singapore, Malaysia, Japan, China and Australia.
One mall almost that attracts locals and tourists is Ngee Ann City in the hearth of Singapore, Orchard road.
Starhill Global is slowly recovering with a 0.7% increase in NPI, due to lower rental rebates given to tenants. Portfolio Occupancy decreased slightly from 96% to 95.5% due decline in Singapore retail. However, assets in Malaysia, Japan and China remained fully occupied.
With the improvement of the covid situation in Singapore, there is increased foot fall to malls. This led to drastic increase in tenant sales, which would in turn lead to increase rental reversions.
It has a dividend yield of 4.37% at a share price of $0.59
Hence, Starhill global is a stable REIT which is primed for recovery
4. Mapletree Commercial Trust
Mapletree Commercial Trust (MCT) has five properties in Singapore with four located along the developing Greater Southern Waterfront and one in the Central Business District.
It owns VivoCity, Singapore’s largest mall which is directly linked to the HabourFront MRT and the gateway to Sentosa.
In the latest earning reports, NPI from VivoCity grew 3.7% y-o-y and maintained a stable occupancy of 97.1% Although rental reversion decreased by 9.6%, retention rate remains healthy at 80.8%. Tenant sales has increased significantly from negative 14.1% to positive 5.2%
With the increase in tenant sales it is likely MCT retail segment will see positive rental reversion soon. On the other hand, it’s business/office portfolio has recorded a slight positive rental reversion of 0.4%
MCT has a low leverage ratio of 33.9% and it's debt maturity is spread out well. Similar to all other REITS in Singapore, the easing of restrictions could lead to higher demand for office spaces and more foot fall to malls in the vicinity.
MCT has a dividend yield of 4.37% at $2.170 and is an extremely stable bluechip company. Hence, it is a great alternative to CPF.
5. Mapletree Industrial Trust
Mapletree industrial trust invest in a diversified portfolio of income-producing real estate, primarily data centres. It has 87 properties in Singapore and 28 properties in North America (including 13 data centres held through the joint venture with Mapletree Investments Pte Ltd).
With Covid accelerating the adoption of technology, there is an increasing need of data centers to collect, store, process and distribute large amounts of data. DCs are an integral part for internet of things to function and hence there will be a growing need for them.
As a result MIT has seen an increase of 17.3% y-o-y. It's overall occupancy rate is 93.7% Management has been actively recycling assets where is divested 26A Ayer Rajah Cresent for S$125m, a price 18.1% above total development and transaction cost. It also has completed the acquisition of a DC and office in Virginia, US with a triple net basis with lease expiry in Jun 2022.
It has a relatively healthy leverage ratio and has a dividend yield of 4.39% at a share price of $2.86
Investing contains risks and it requires constant monitoring of the company’s developments. It also takes experience, proper analysis and correct judgement.
If you do not possess the patience or have the time to research stocks individually, a good way is to invest in an ETF.
As long as you have a long time horizon and dollar cost average into your positions, you are most likely to get good return.
For more investment ideas click here to view our ideas for JULY2021!