Is VAP a cheap ETF buy staring investors in the face?

Could Vanguard Australian Property Securities Index ETF (ASX: VAP) be a cheap opportunity staring investors in the face?

About VAP

This ETF looks to give investors a cheap way to invest across various real estate investment trusts (REIT) including retail, office, industrial and ‘diversified’.

At 31 July 2020 it had 29 holdings. Its biggest 10 holdings were: Goodman Group (ASX: GMG), Scentre Group (ASX: SCG), DEXUS Property Group (ASX: DXS), Mirvac Group (ASX: MGR), Stockland Corporation Ltd (ASX: SGP), GPT Group (ASX: GPT), Vicinity Centres (ASX: VCX), Charter Hall Group (ASX: CHC), Shopping Cntrs Austrls Prprty Gp Re Ltd (ASX: SCP) and Charter Hall Long WALE REIT (ASX: CLW).

It has an annual management fee of 0.23%.

Other similar ETFs

Another Australian property ETF is VanEck Vectors Australian Property ETF (ASX: MVA). It has similar holdings, though with different holding percentages, with a management cost of 0.35%.

How has the ETF performed?

Source: Best ETFs VAP 10-year share price chart.

According to Vanguard, It has delivered average returns per annum of 9.74% since the ETF’s inception in October 2010.

Why it could be a cheap opportunity

The VAP share price is still down by around 25% from the original COVID-19 crash. Property share prices, particularly shopping centre ones, remain subdued due to the impacts of COVID-19.

Some property businesses have recognised a reduction in property valuations. For example, Scentre recently recognised a $4 billion valuation drop across its portfolio.

However, if you/Vanguard takes the REIT property valuations as correct, then at 31 July 2020 it had a price to book ratio of 0.9x. That means, investors could buy $100 worth of property REITs through VAP for $90. That’s an attractive 10% discount after recent revaluations.

If you think a 25% reduction of VAP is a fair price, or good price, then it could be a cheap opportunity. However, the rise of e-commerce could mean that shopping centres don’t quite recover.

But there are plenty of other ETFs out there for growth and/or dividends. Check out our list of ASX ETFs.

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Disclaimer: Any information contained in this article is limited to general financial advice/information only. The information should not be relied upon because it has not taken into account your specific needs, goals or objectives. Please, consult a licenced and trusted financial adviser before acting on the information. Past performance is no guarantee of future performance. Nothing in this article should be considered a guarantee. Investing is risky and can result in capital loss. This article is authorised by Owen Raszkiewicz of The Rask Group Pty Ltd. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.
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