Regal Real Estate Investment Trust (SEHK:1881) is a HKDHK$7.98B real estate investment trust (REIT), which is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Hong Kong stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether Regal Real Estate Investment Trust is a laggard or leader relative to its real estate sector peers. View our latest analysis for Regal Real Estate Investment Trust

What’s the catalyst for Regal Real Estate Investment Trust’s sector growth?

Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw growth of over 50%, beating the Hong Kong market growth of 11.10%. Regal Real Estate Investment Trust leads the pack with its impressive earnings growth of over 100% last year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -75.93% compared to the wider REIT sector growth hovering next year.

Is Regal Real Estate Investment Trust and the sector relatively cheap?

The REIT sector’s PE is currently hovering around 8x, lower than the rest of the Hong Kong stock market PE of 14x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 9.37% on equities compared to the market’s 10.07%. On the stock-level, Regal Real Estate Investment Trust is trading at a PE ratio of 4x, which is relatively in-line with the average REIT stock. In terms of returns, Regal Real Estate Investment Trust generated 14.09% in the past year, which is 4.71% over the REIT sector.

What this means for you:

Are you a shareholder? Regal Real Estate Investment Trust is a REIT industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If your initial investment thesis is around the growth prospects of Regal Real Estate Investment Trust, there are other REIT companies that are expected to deliver higher growth in the future, and perhaps trading at a discount to the industry average. Consider how Regal Real Estate Investment Trust fits into your wider portfolio and the opportunity cost of holding onto the stock.