April 7th, 2022 | 14:25 CEST
The alternative to concrete gold: Vonovia, Hong Lai Huat, HeidelbergCement
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"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
Vonovia: Even a 3.8% dividend yield is not enough
Anyone buying an apartment or a house has to dig deep into their pockets: Around 12% in additional costs are added to the purchase price. In addition, tradespeople almost always end up being more expensive than previously thought. There are further cost traps for owner-occupiers: Once you have settled in, you naturally want it to be homely. Meanwhile, almost every craftsman has his own showroom and offers products and solutions for sale there. In the showroom, the sales funnel reliably guides customers in the direction of the expensive solutions, and already the home has become even more expensive by a few (thousand) euros. So what could be an alternative to the real estate cost trap for investors? Immo shares!
Stocks like Vonovia have around 400,000 apartments in their portfolio and manage them. Thanks to regular rental income, dividends also bubble up for investors. On April 29, the Annual General Meeting will decide on the distribution for 2021. The figure in question is 1.66 per dividend-bearing share. Therefore, the dividend yield is around 3.8% - a solid figure given the low interest rates. Because of inflation at around 7%, the dividend is not enough for a real return. Investors must hope for price gains. But the share is stuck in a downtrend: it has fallen by around 18% since a year ago - so Vonovia's share is no alternative to concrete gold.
Hong Lai Huat: Where real estate still offers margins
The chances are possibly better with the real estate developer Hong Lai Huat from Singapore. The Company expanded from its home market into Cambodia years ago. According to rating agency Fitch, the emerging country in Southeast Asia offers 4.7% growth in 2022. That is partly because 90% of people in Cambodia are already vaccinated. Hong Lai Huat has already completed a project with D'Seaview that includes 737 residential units and rows of stores. The apartments are mostly sold and have attracted Cambodians as well as foreigners. In an interview, Executive Director Dylan Hong explains, among other things, which target groups Hong Lai Huat is focusing on.
In addition to D'Seaview, the Company is planning further residential projects and emphasizes that it now has a well-rehearsed team for all aspects of real estate projects in Cambodia. "Our coworkers on-site reported, however, first and foremost that they understood during the selling of the dwellings even more strongly, how the market functions and which requirements customers have," explains Ong. In addition to residential projects, the Company has launched the Agri Hub, a gigantic agricultural and industrial project covering an area of 100,000,000 square meters, just an hour's drive from Phnom Penh. Here, the Company plans to implement fish farms with solar roofs, locate light industry and provide housing. "We intend to develop the Agri Hub through joint ventures or the sale or lease of land, which will provide the Group with several diversified income streams," Ong explains. Hong Lai Huat has already entered into a joint venture with a commodity company in this regard, but it has yet to be approved. With Hong Lai Huat more than doubling its revenue in 2021 and business picking up in Cambodia, the stock could also offer prospects. While the dividend of SGD 0.002 per share is low, the payout shows where the Company is headed.
HeidelbergCement: How sustainable is the share?
When real estate prices rise, construction projects also become more popular. The most important building material is still concrete. But the material has fallen into disrepute because of its high energy requirements. More and more technologies are relying on natural materials or carbon fibers. Some components even come from 3D printers and are arranged so that their shape resembles models from nature, such as snail shells. But this is (still) a vision of the future. Concrete remains the essential building material. HeidelbergCement recently announced its intention to raise its dividend. As the share price falls, the dividend yield rises and has now reached a value of more than 5%. However, with the share price down 19% in the past three months alone, the stock remains a hot commodity.
The boom in the real estate market seems to be over for first-tier real estate stocks. Although the payouts at Vonovia or HeidelbergCement are good, the shares are going into reverse. An alternative for speculative investors could be Hong Lai Huat. The Company operates in a growth market where there are still margins to be made, and the competition is manageable. Although the share prices have been moving sideways in recent months and years, the latest figures give cause for hope.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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