M-REIT Data DY

1. I use to get REITs from 10% - 12% in term of DY those day. Now it has shrunk to just 7%. :( Is REITs getting expensive nowaday ? I believe it is, if compare the REIT data 4 years back. Nevertheless, 7% is still consider attractive comparatively with current interest rate. Of all the REITs only AXREIT is aggrasively adding new properties enchancing shareholders value. The rest more or less status quo or adding just one/two... Are we coming to a saturated point ?

 

2. Watch List - KPS, PUNCAK, KHSB

 

3. Good Luck.

No surprises from two largest REIT

Underscoring their defensive characteristics, earnings results for 1Q2011 for the two largest real estate investment trusts (REIT) on the local bourse were broadly in line with market expectations. No major surprises.

CMMT cmpletes first post-listing acquisition

CapitaMalls Malaysia Trust (CMMT) — the second largest REIT on the local bourse by market capitalisation — has just completed its first property acquisition since its debut on Bursa Malaysia in July 2010. The purchase of Gurney Plaza Extension was finalised at end-March 2011 — and its contributions will be reflected in the current quarter’s results and beyond.

 

To recap, the new acquisition is a nine-storey retail extension block adjoining the Gurney Plaza mall in Penang with a RM215 million price tag and added almost 140,000 sq ft of net lettable area (NLA) to CMMT’s portfolio of assets under management. That is equivalent to an area expansion of roughly 7.5% and raised its total NLA to just over two million sq ft.

 

To part finance the acquisition, some 144.9 million new units were issued — at RM1.06 per unit — enlarging the total units in circulation to 1,494.9 million. At the prevailing unit price of RM1.16, CMMT has a market capitalisation of more than RM1.73 billion. The REIT has a relatively large free float of about 58%.

 

As of end-March, CMMT has investment properties valued at a combined RM2.37 billion and total assets of almost RM2.5 billion. Its book value stood at RM1.03 per unit.

 

CMMT’s 1Q11 earnings results were broadly in line with expectations. Revenue totalled some RM52.7 million while net profit was reported at RM31.4 million, including fair value gain of RM5.7 million for the revaluation of Gurney Plaza Extension. Revenue contribution was more or less evenly distributed among the three properties in its portfolio, Gurney Plaza, Sungei Wang Plaza and The Mines.

 

As mentioned above, earnings in the upcoming quarters will be boosted by the latest acquisition — as well as better rental rates. Lease renewals in 1Q11 for all three properties saw upward rental revisions, averaging some 7.6%. Meanwhile, occupancy rates stayed high across the board, at an average of about 98.7% in 1Q11.

 

CMMT is on track to meeting its forecast income distribution of 7.46 sen per unit for the current year. As stated in the prospectus, the trust intends to distribute all of its income this year and at least 90% of income going forward. The first distribution of 1.74 sen per unit has already been made just prior to the completion of acquisition of Gurney Plaza Extension and the issuance of the new units.

 

Assuming total income distribution of 7.46 sen per unit, investors will earn a yield of 6.4% at the current price. That is a fairly attractive return given its low-risk profile and it is well above prevailing bank deposit rates.

 

Sunway REIT yield estimated at 6.1%

Similarly, Sunway REIT is confident of hitting its earnings forecast for the current financial year ending June 2011. At the unit price of RM1.10, it is currently the largest listed real estate investment trust on the local bourse, with a market capitalisation of more than RM2.95 billion. Its free float is estimated at roughly 62%, which gives investors pretty good liquidity.

 

The trust reported revenue and income available for distribution totalling RM240.1 million and RM133.2 million in the first nine months of FY11, respectively, including surplus cash from 50% of manager’s fees paid in units. Net assets per unit stood at 97 sen as at end-March 2011.

 

Its retail assets fared slightly better than forecast on the back of continued growth in mall visitorship, near full occupancy and upward revision in rental rates. The flagship Sunway Pyramid Shopping Mall, which contributed to more than 61% of total net property income, has an average occupancy of 98.5% for 9MFY11. It achieved a 16.5% (for a three-year term) growth in rental for leases renewed so far this financial year, which accounted for nearly 69% of the mall’s total NLA.

 

On the other hand, contributions from the hospitality arm, including the Sunway Resort Hotel & Spa and Pyramid Tower Hotel, were below expectations in the latest 3QFY11. This was attributed to lower tourist arrivals due, in part, to cancellations from Japanese corporates following the earthquake and resulting tsunami disasters in the country. Nonetheless, earnings for the nine-month period remain on track to meeting management’s forecast for the year.

 

Elsewhere, earnings from office properties were resilient. Occupancy at Sunway Tower averaged a high 97% in the financial year to date while the Menara Sunway is fully occupied.

 

For the full year, total income distribution is estimated at 6.74 sen per unit, which will earn investors a yield of 6.1% at the prevailing price of RM1.10.

The trust intends to distribute to unit holders 100% of net earnings in the first two years of listing and a minimum of 90% annual profits thereafter.

 

Some RM87.4 million of the available income for distribution, or about 3.26 sen per unit, has already been paid. Sunway REIT will trade ex-entitlement for the third round of distribution, of 1.7 sen per unit, on 16th May.

 

As with CMMT, Sunway REIT too has just completed its first acquisition post-listing. The purchase of Putra Place for RM514 million was finalised in April 2011, after its winning bid at a public auction. The acquisition will boost the combined value of its investment properties to over RM4.2 billion. (Note that there is currently a legal dispute involving the purchase with Metroplex, but the trust believes that the former’s claims are unlikely to be successful).

 

The newly acquired property comprises The Mall (an 8-level shopping complex), 100 Putra Place (office tower), and 5-star hotel, The Legend, including its serviced apartments, penthouses and parking bays.

 

With strong sponsors, we expect both REITs will continue to expand their portfolios of assets going forward.

 

Sunway REIT has been granted a right of first refusal on Sunway City’s properties. The latter is the single largest unit holder in the trust and is one of the largest property developers in the country.

 

Meanwhile, CMMT has a right of first refusal for CapitaMalls Asia’s retail properties in Malaysia. The latter is its biggest stakeholder and a subsidiary of Singapore-listed CapitaLand. It is also a leading integrated shopping mall owner, developer and manager in the region, with some 91 retail properties worth a collective S$23.7 billion (RM57.5 billion) in Singapore, China, Japan, Malaysia and India.

REITs yielded solid returns in 2010

Real estate investment trusts (REITs) are good investing alternatives for the more risk averse investors, particularly during periods of increased market volatility, with their higher than market average yields and defensive profiles. The listings of Sunway REIT and CapitaMalls Malaysia Trust (CMMT), two of the largest REITS in the country, last year have further turned the spotlight on the sector and boosted investor interest.

 

Total 15% gains from CMMT since listing

Investors in CMMT have fared quite well, making some 11% in capital gains based on the prevailing price of RM1.09 and the closing price of 98 sen per unit on its first day of listing. The trust recently went ex-entitlement for its maiden income distribution of 3.4 sen per unit. Including this latest income distribution, investor returns would total a pretty smart 15% — for a seven-month holding period.

 

CMMT is currently the second largest REIT listed on the local bourse, by total assets and market capitalisation. It is also among the more liquid of the locally listed REITs with a fairly large free float of about 58% of total units issued.

 

The trust is focused on the retail sector. Its three properties are the Gurney Plaza in Penang, 205 strata parcels within Sungei Wang Plaza (which is about 61.9% of the mall’s retail floor area plus car park) in the heart of Kuala Lumpur and The Mines in Selangor — valued at a collective RM2.14 billion with net lettable area (NLA) totalling almost 1.88 million square feet.

All three properties registered good occupancy rates last year, averaging 98.3%. Rental rates for tenancies renewed during this period, which accounted for roughly 22% of the portfolio’s total NLA, were some 4.9% higher, on average.

 

CMMT is in the midst of finalising the acquisition of the extension to Gurney Plaza for RM215 million, which will add some 135,000 sq ft of NLA to its area under management. The acquisition will be part financed by new units to be issued to raise RM167.1 million.

 

It comes as no surprise that

CMMT’s latest earnings results (for the period from July 14 to Dec 31, 2010) were pretty much in line with the forecasts made in its listing prospectus. A relatively high degree of earnings predictability is one of the key characteristics of REITs.

 

Revenue totalled RM94.6 million while distributable income stood at RM45.9 million. As per its stated intentions, CMMT paid out all its distributable income last year — equivalent to 3.4 sen per unit — and is expected to do the same for the current year.

 

Based on the income estimate of RM101.5 million, distribution should increase to about 7.46 sen per unit. This translates into a gross yield of 6.8% for unitholders at the prevailing price.

 

Whilst this is at the lower end of the range of yields expected from locally listed REITs, we suspect

CMMT’s implied premium is attributable to its size as well as comparatively high liquidity and free float. Its net asset value stood at RM1.03 per unit at end-2010.

 

Potential re-rating for laggard Starhill

In fact, other than CMMT, unit price gains for most of the locally listed REITs have been fairly good over the past year — save for Starhill REIT, which is undergoing a restructuring exercise. As a result, the latter’s unit price lagged the sector.

 

The trust disposed of the shopping malls, Lot 10 and Starhill Gallery, last year and is currently finalising the acquisition of nine properties, including the Ritz-Carlton Hotel, Hilton Niseko and Pangkor Laut Resort, that will see it emerge as a focused hospitality REIT.

 

Starhill REIT is currently trading well below its net asset value (NAV) of RM1.16 per unit and could enjoy an upward re-rating upon completion of its restructuring exercise, expected by mid-2011. Meanwhile, the trust expects to maintain last year’s distribution of 6.49 sen per unit in the current financial year ending June 2011. That will give investors a yield of roughly 7.6%.

 

Quill Capita trading below NAV of RM1.28

Another REIT trust that has lagged the sector and could do well in catching up is Quill Capita. Its unit price has gained just 3% since the beginning of last year and is still trading below the NAV of RM1.28.

 

Quill Capita is focused primarily on commercial-industrial properties. At present, the trust has 10 properties in its portfolio — with net lettable area totalling more than 1.288 million sq ft — worth about RM810 million. The assets are located in Cyberjaya, Kuala Lumpur, Selangor and Penang and the majority of its tenants are MNC/foreign related companies. It has not made any new purchases over the past two years but remains on the lookout for yield accretive acquisitions.

 

Nonetheless, Quill Capita has managed to steadily raise its distribution over the past few years — from 6.46 sen in 2007 to 8.03 sen last year. Based on a similar payout, income distribution in the current year could total some 8.26 sen per unit. That will earn investors a yield of 7.6% at the prevailing price of RM1.08.

REITs: Few earnings surprises

Living up to their reputation for comparative predictability and low risks, earnings results for real estate investment trusts (REITs) for the latest quarter ended September 2010 offered few surprises.

CapitaMalls Malaysia Trust (CMMT) announced its maiden earnings results for the period from July 14 to Sept 30 — reporting net profit of RM21 million, which was just marginally ahead of the forecast made in its prospectus.

Its three properties — Gurney Plaza in Penang, The Mines in Selangor and Sungei Wang Plaza in the heart of Kuala Lumpur — have a combined net lettable area of almost 1.88 million sq ft and maintained almost full occupancy, averaging at roughly 98.3% as at end-September.

Leases up for renewal in the year-to-date — which accounted for about 16.9% of total net lettable area under its management — too have registered positive rental increases, ranging from 2.5% for Sungei Wang and 6.6% for Gurney Plaza.

CMMT’s maiden profits distribution expected in 1Q2011

CMMT has committed to distributing 100% of earnings in the first two years of listing and at least 90% of annual profits thereafter.

We expect its first dividend payment for the eight months to December will be paid sometime 1Q2011.

Based on the trust’s earnings forecast, distribution will total 4.78 sen for this year and 7.44 sen for 2011. That would earn unit holders a yield of 4.2% and 6.6%, respectively at the current price of RM1.13.

CMMT is a pure play shopping mall REIT sponsored by CapitaMalls Asia, a member of Singapore-based CapitaLand group of companies. It was one of the two REITS listed on the local bourse this year and is currently the second largest in terms of market capitalisation.

Similarly, Quill Capita Trust’s earnings results for 3Q2010 were broadly in line with expectations. Net profit (excluding unrealised gains/losses) was up a decent 7% year-on-year (y-o-y) during the quarter and 4% for the nine months to date. It is on track to meet our earnings estimate of some RM34 million for the full year.

Assuming the same level of profit payout as last year — just over 92% — distributions would total 7.91 sen per unit, which would give unit holders a fairly attractive yield of 7.3% at the current price of RM1.08. The trust made an interim distribution of 3.85 sen per unit back in August.

Quill Capita is trading below NAV of RM1.22

Quill Capita made no new acquisition in the past two years but is believed to be looking at two properties within the Klang Valley worth some RM400 million.

At present, the trust has 10 properties in its portfolio — with net lettable area totalling more than 1.29 million sq ft — worth RM788 million. Its assets, primarily commercial-industrial properties are located in Cyberjaya, Kuala Lumpur, Selangor and Penang.

In addition to attractive yields, Quill Capita is currently trading below its net asset value of RM1.22 per share. That suggests room for capital gains for investors.

On the other hand, AmFirst REIT’s underlying earnings for 2QFY2011 were a little disappointing.

Revenue fell 10% y-o-y and 12% quarter-on-quarter (q-o-q) to RM22.1 million due, primarily, to a drop in the average occupancy rate for Kelana Brem Towers — to 63.8% as at end-September — and rental rebates as compensation for the disruption during refurbishment works at Summit Hotel.

More positively, occupancy at its flagship properties, Bangunan Ambank Group and Menara Ambank remains high at 95% to 100%.

One-off gains boost AmFirst’s profits distribution in FY10

However, thanks to some RM1.89 million in compensation for the compulsory acquisition of land fronting The Summit Subang USJ recognised during the quarter, net profit improved to RM10.6 million.

A further RM3.78 million will be recognised evenly in the next two quarters, which should boost total distribution for the current financial year — we estimate at 10 sen per unit assuming 100% payout. That will earn unit holders yields totalling 8.5% at the current price of RM1.18.

Nevertheless, earnings in the following year are likely to be lower in the absence of further one-off gains. As such, we forecast distribution could fall to around nine sen per unit in FY12, which would, nevertheless, still give investors an attractive 7.6% yield.

Although the trust registered positive rental revisions for several of its properties this year, the anticipated supply of office space coming onstream over the next few years would likely keep a lid on the quantum for future hikes.

AmFirst is currently in the midst of acquiring an additional retail lot in The Summit for RM6.8 million but has aborted plans to buy a five-storey building in Cyberjaya. The acquisition is targeted for completion by end-2010.

What is REITS and how to get monthly dividend payments from it

A LOT of investors, especially senior citizens, are hoping to get consistent and regular dividend payments from stocks.

In this article, we will look into constructing an investment portfolio, which consists of real estate investment trusts (REITs), to get monthly dividend payments.

 

A REIT is a real estate company that pool investor funds to purchase a portfolio of properties. Normally, it has two unique characteristics: investment in income-producing properties, with almost all of its profits distributed to investors as dividends.

 

From the table, based on the latest stock price (as at Oct 18) and on assumption that the same dividend payments will be paid over the next 12-month period, almost all REITs will provide about 7%-8% dividend yields. Based on our observations, most of the REITs will try to pay higher dividends over the years. Hence, if the overall economy continues to recover, some REITs may pay even higher dividends for the coming few years.

 

Due to them only listing at the middle of this year, we have excluded CMMT and Sunreit.

 

As mentioned earlier, a lot of retirees would like to invest in investment assets that can provide a consistent and regular dividend income. Therefore, we think that REITs can provide a good alternative to the retirees. From the table, except for Arreit, Atrium, Axreit and Hektar, all other REITs will make dividend payments twice per year. Most of them will pay their dividends in the month of February and August. Hence, if an investor would like to receive his dividends other than the above two months, he may need to diversify their REITs into holding many types of REITs.

 

Based on the list of REITs in the table, we can see that, except for the month of January and April, dividend payments were being made at different months throughout the year, thus investors can receive a stream of dividend income by buying into different types of REITs.

 

Investors can build a REIT portfolio consisting of a few REITs which make dividend payments at different months of the year. The following is just one of selection options available for consideration.

 

Based on the current price dated on Oct 18, assuming that the same dividends will be paid in the next 12 months, a portfolio with AMfirst, Arreit, Atrium and Hektar can generate a dividend yield of more than 8% (see table). Besides, by buying with equal amount into these four REITs, investors can get dividend payments for almost every month, except for the month of January, April, July and October.

 

Nevertheless, investors need to understand that the above selections are solely based on the assumption that these REITs will reward investors with the same dividends and pay during the same month as shown in the table above.

 

We also understand that apart from the above four REITs, some other REITs may reward investors with even higher dividend payments.

REITs: Expanding portfolios

Locally listed real estate investment trusts (REITs) appear to be on an expansionary path with quite a few announcing new asset acquisitions, so far this year. This is positive for the sector in terms of attracting more investment funds on the back of a larger asset base and improved liquidity.

 

Malaysian REITs in general still offer fairly good yields, estimated to range from 6% to 8.4%, with a simple average of about 7.5%.

 

Enlarging asset base

Among the latest to announce new acquisitions is Amanah Raya REIT (ARREIT). The trust has proposed to buy three properties from PKNS for a total of RM270 million. The properties would then be leased back to the latter under a 12-year agreement, thus ensuring full occupancy for the duration.

 

The purchase will be partially financed by the issuance of some 122.7 million new trust units, priced at 88 sen per unit. Total units in circulation will increase from the existing 573.2 million to 695.9 million.

 

This latest proposal is the trust’s second acquisition this year. Earlier in May, ARREIT completed the purchase of two properties — Selayang Mall and Dana 13 — worth a collective RM227 million.

 

Upon completion of this latest proposed acquisition, total assets will rise to RM1.27 billion from the current RM995.8 million. Currently, its portfolio consists of 15 properties in the hospitality, higher education, commercial and industrial segments.

Meanwhile, Axis-REIT is also aiming to boost its asset base over the RM1 billion mark by the end of this year. The trust has already completed the acquisition of two logistic warehouses in Seberang Prai for RM26.5 million in 1Q10 and is currently in the midst of finalising the purchase of four other properties worth RM240 million.

 

Upon completion, targeted by October 2010, Axis-REIT’s asset base will reach RM1.2 billion. The trust is further evaluating potential acquisitions valued at some RM190 million including logistic and retail warehouses in Johor and an office building in Cyberjaya.

 

To part-finance the new purchases, Axis-REIT will be issuing some 68.8 million new units priced at RM1.97 each, enlarging its total units in circulation to 375.9 million.

 

Elsewhere, newly-listed CMMT is evaluating the viability of acquiring a nine-storey retail extension block adjoining the Gurney Plaza, valued at some RM215 million. The acquisition would add 135,000 square feet of net lettable area to CMMT’s existing portfolio.

 

CMMT owns three shopping malls — the Gurney Plaza in Penang, 205 strata parcels within Sungei Wang Plaza (which is about 61.9% of the mall’s retail floor area plus car park) and The Mines in Selangor — valued at a collective RM2.13 billion with net lettable area totalling almost 1.88 million square feet.

 

AmFIRST REIT too has proposed to acquire a retail lot in The Summit Subang USJ — with net lettable area of 37,372 square feet for RM6.8 million — and the FBSM Plaza for RM51.5 million.

 

The trust already owns the Summit Hotel, about 70% of the retail space in the mall and 12 out of 13 office floors — with net lettable area totalling nearly one million square feet. Its existing portfolio of six properties is valued at just over RM1 billion.

 

Quill: Trading below NAV

Quill Capita Trust is among the cheaper valued REITs, in terms of price to net asset value — currently trading at only 0.8 times its NAV of RM1.22 as at June 30, 2010.

 

Thus, the trust could offer investors potential capital gains, on top of steady yields. We estimate income distribution to total about 7.9 sen per unit for the current year, which would give investors a yield of 7.9% at the prevailing unit price.

 

The trust, which invests primarily in commercial properties, was listed back in January 2007. From the initial four Quill buildings in Cyberjaya, its portfolio has expanded to 10 properties worth over RM788 million.

 

Its properties are located in Cyberjaya, Kuala Lumpur, Selangor and Penang with net lettable area under management totalling more than 1.288 million square feet. As for future expansion, Quill is believed to be currently looking at two properties within the Klang Valley worth some RM400 million.

Switching More To REITs

Recently added myself with more REITs. ARREIT and STAREIT are now under my belt. As market drive higher i am cutting my portfolio to REITs. I am almost 40% on REITs now. Still planing to increase further when i am able to liquidate more of my shares.

Looking at current state, CI 1500 become imminent. I am quite optimistic that Malaysia will hit historical height and probably will happen by year end or sooner. When everybody think so, it is also likely the time for us to think back. Do you want to get caught again ?? I have been around the past time, certainly won't not want to get caught again. Better precautions dude.

REIT vs direct real estate investment

INVESTING in real estate can be tricky.

 

For a start, those who intend to make a quick buck by “flipping” property within a few months will find that it is risky, especially in a property market less buoyant than in Hong Kong or Singapore.

 

The alternative is hard work, that is, managing residential properties (and absorbing all the hidden costs that come along with it) as long term investments, receiving rent and selling them off for a capital gain or profit.

 

Another factor that may deter investors from real estate is the difficulty in raising enough capital to purchase a particular property.

 

So, should you consider putting your money in a real estate investment trust (REIT) instead?

 

Granted, a REIT does not comprise residential property, but if it is profit you are interested in, it may be an option.

 

REITs originated in the United States in the 1960s, but it wasn’t until 2005 that Axis REIT became the first property trust to be listed on Bursa Malaysia.

 

In Malaysia, there are now 14 REITs to choose from on the Main Market, offering investors a choice to own stakes in commercial, industrial, plantation and office real estate.

 

Aside from being more liquid than investing in real estate, one of the reasons why REITs are more appealing than investing in actual real estate is because of its high yield.

 

Gross dividend yield in the FTSE Bursa Malaysia index is about 2.9%, while the average yield for a REIT in Malaysia is about 8%.

 

REITs yield higher returns because commercial real estate generates a huge amount of cash flow from rentals.

 

If one invests in real estate though, it may be hard to charge the most preferred rental rate, even if the property had been purchased for a hefty price, simply due to market forces.

 

As for REIT prices on the stock market, they generally tend to be “low risk” because their prices are sustained by the yield factor, hence the volatility element is reduced.

 

Even so, REITs are not immune to economic difficulties.

 

REITs such as AmFirst, Hektar, UOA and Axis hit their lowest point in the middle of the financial crisis in 2008 but have since recovered to their pre-crisis prices, if not better.

 

Part of their recovery, says an analyst, is due to good management, good investor relations and a proven track record when it comes to acquisitions.

 

Still, one critic of REITs says it is probably more worthwhile to purchase stocks of established companies if they want to play safe.

 

Advocates of the property trust point to the fact that REITs are a different investment class altogether, choosing to view them as an investment that bridges the gap between a fixed deposit and the stock market.

 

One drawback of REITs is their inability to benefit from capital gain, unlike real estate.

 

But with REITs, returns may be secured with less risk which make them a nice way to take advantage of the big booms in the real estate market.

 

Investors can do without taking on the risk of mortgage payments, unscrupulous tenants and rising tax rates.

 

However, less risk obviously comes with less reward.

 

Good capital appreciation is still the main factor driving demand for landed residential properties.

 

Since 2008, there has been an annual compounded growth rate of 10% for capital appreciation in residential hotspots such as Petaling Jaya, Taman Tun Dr. Ismail and Mont Kiara.

 

A home can go up in value ten-fold given the right market conditions, which would give one a hefty sum of money right into his or her pocket - this won’t happen with any REIT.

 

Ultimately, for someone who wants to have more control of their assets and is willing to improve their value, investing in residential real estate can be a good choice.

 

For someone looking for passive real estate investment, with the added benefits of portfolio diversification and liquidity, a REIT is a good option to consider.

 

Think of them as allowing investors to be exposed to the real estate market without having to fork out as much capital.

 

Alternatively, REITs could be purchased as part of a balanced portfolio, until one has enough capital to enter the real estate market.

REIT growth is key to capital gains

KUALA LUMPUR: The Edge Financial Daily yesterday wrote on the weak price performance of the two newly listed REITs, Sunway Real Estate Investment Trust (SunREIT) and CapitaMalls Malaysia Trust (CMMT).

It highlighted the fact that while capital gains for REITs may not be strong, the total returns for shareholders is very decent after adding back dividends or distribution per unit.

All Malaysian REITs, even those now trading below IPO prices, have given positive total return to shareholders.

While high yields are likely to keep REIT investors contented, the key to capital growth in REITs is in raising overall yields and asset value, usually through yield-accretive acquisitions.

The lack of such yield-accretive acquisitions, or value enhancement propositions, is one of the key factors behind the lacklustre price performance of many REITs.

It is not surprisingly REITs are often viewed as one-off exercises to realise the value of a developer’s assets. “REIT growth is key, because unlike a company which can undergo business expansion, REITs are often injected at the height of their potential. And unit-holders still want to see a growth in returns,” said an analyst.

Generally, returns can grow through increasing the REIT’s net profit, changing the distribution policy or through property acquisition. The acquisition may be funded through internal cash reserves, a rights issue or a new issue of shares.

According to a study by The Edge Financial Daily, the earnings per unit (EPU), on average, for the 11 Malaysian REITs (excluding SunREIT and CMMT) have dipped 4.5%, from 15 sen to 14.4 sen, during the FY07 to FY09 period.

Starhill REIT stands out from the pack, having grown its EPU by 339%, from 6.9 sen in FY07 to 30.2 sen in FY09. The movement was mostly due to increases in fair value from property revaluations of RM274.4 million during June 2009.

AmFirst REIT also has a high growth rate of 73%, from 7.3 sen to 12.6 sen over the same period, largely due to property revaluation of RM23.5 million during the year ended March 31, 2010.

Al-’Aqar KPJ REIT, the most active REIT acquirer, is another REIT which has enjoyed higher EPU growth, totalling 49% from 7.5 sen to 11.1 sen from FY07 to FY09. In FY08 and FY09, Al-’Aqar KPJ REIT, the sixth largest REIT by capitalisation, introduced 14 more properties into its portfolio, comprising hospitals, an office building and a nursing college at a total cost of RM451.6 million. On July 6, Al-’Aqar added a further seven medical properties as well as a hotel for a total of RM383.4 million, raised partially by cash and a new issue of shares. It remains to be seen how this will affect the unit-holders in the coming financial year.

In contrast, Quill Capita REIT and UOA REIT appear to have suffered lower EPU over the years, falling by 68% (from 26.3 sen to 8.5 sen) and 48% (40.7 sen to 21.3 sen), respectively, from FY07 to FY09, mainly due to a slowdown in property appreciation gains. Based on annual reports, Quill Capita’s net appreciation in fair value of properties was RM57.1 million in FY07 compared to a total of RM3.5 million in FY08 and FY09.

Likewise, UOA REIT’s properties appreciated RM29.1 million in FY09 compared to RM78.8 million in FY07. In order to increase their current yields, REITs should consider the future values of each new asset in their portfolio. A manager should consider the net effect of a new acquisition on portfolio yield. For example, funding the acquisition with borrowings charged at an effective interest rate higher than the yield will lead to a fall in the portfolio’s overall return.

For the two new listings, SunREIT and CMMT, the prospects for acquisition look bright.

SunREIT had said it aims to double its asset base in five to seven years, whereas CMMT has the first right of refusal to acquire CapitaMall Asia’s properties.

CapitaMall Asia is one of Asia’s leading shopping mall developers, managers and owners. However, valuation of any new asset acquired will be key to the REIT’s value and yield.

This article appeared in The Edge Financial Daily, July 27, 2010.

Bought QCAPITA

Bought myself QCAPITA at RM1.02. Aiming for DPU for the coming Q on 29th July 2010, expected to be around 3.8sen. NAV stood at RM1.21, so there is 18% discount there, not a bad deal.

Strategy Of REITs Investment

elmo said...

I don’t know if LaBrooy, the CEO of AXREIT is speaking for himself or for the general REIT market.

REIT is rather new in this country and most of us have no experience in handling them. I have some AXREIT shares at low entry cost. The return at that entry price is around 12-13%. But tread carefully don’t get euphoric when the index shoots beyond 1300 like today when we can boast about our “gain” in both the dividend income as well as property appreciation.

Let me take you back to some one and half years ago when the market was down. AXREIT being one of the toughest guy in the block was hammered down from above RM1.70 to a bare RM1.00 per share. As we know, market index, like tides floats up and down. We should rebalance our portfolios when the tides are high lest one fine day when the tide goes out we realise that none of us have our pants on!

Now lets question ourselves here. Shall I get into AXREIT at RM2.10 now (KLCI>1300) or am I going to take a chance for the chips to go down (which may not happen for a long long time) and lost the dividend income before I jump in?

Just my 2 sens. When you are confused like I often was, take youself down the path of Zen..."Patience". Trust your instinct. Pick your choice. Lastly, Remember the phrase "Margin of safety".

July 21, 2010 9:01:00 AM GMT+08:00

horse said...

elmo,

probably LaBrooy has tonned on hand waiting to dispose ?? haha

anyhow personally i think REITs investment should not treat as normal share, we should adopt/embark DCA strategy if one really serious of investing in REITs. No right or wrong, just sharing my view. coz, dealing with REIT our ultimate goal is to earn regular interest (DPU) higher than FD.

Ok. this exactly how it work....

1) first set your target of DPU return rate, say anything more than 8% DPU, you will invest else u will not trigger any purchase on REIT.

2) investment time frame should be fairly long (5 to 7 years)

3) invest at regular intervals (1 a month, 1 a quarter or 1 a year)

4) invest at each of those intervals in equal amount or size of lots

5) these regular investments should continue through all kind of market conditions – good, bad and indifferent

e.g say you've 60K, you gradually invest 60K for 5 years. You can opt for 1K a month, d remaining put in FD. 1K a month for REIT that give > 8%, drawdown from FD every month untill it turn ZERO.

You will notice the advantage of having the actual "True Average Cost".

So, this is something for us to consider in future since the REIT industry is gradually bigger in size in M'sia.

elmo - i think above will addressed your hesistation in REIT investment whether to carry out now or later or scare of lost of dividend income.

Anyone else have any better method ??

July 21, 2010 10:08:00 PM GMT+08:00

elmo said...

I sort of liken investment in REIT as to purchase a small unit of Rental Business Property. As usual, the prices of this property in a long run will just appreciate if it’s location remains in the prime business area. O.K. location of a premise is static but the center of activity migrates with time. That’s point number one.

Two, the market prices of any REIT floats with the market sentiment as a whole. As I have mentioned, take AXIS for example (I am more familiar with this one) before the subprime crisis Axis worked it’s way up to RM1.70 per share but sinks to just less than RM1.00 /share! Such a variation has happened and I bet it will happen again.

We all have limited Cash so we have to work it out where is our entry point for taking up REIT investment. I think you will agree with me not anytime is the best time for entry. Definitely not any price is a good price to take up the investment. Why buy a shoplot for RM1 million at KLCI 1300 when you may be able to get one for RM750,000 some 3 years down the road when KLCI say sinks below 900?

Having said that I think of all, yes ALL the REITs counters, AXIS is the best bet at this point in time. … so long as this CEO (LaBrooy) is running the show. BUT do keep an eye (or two) on their policy. AXIS is very aggressive, keep acquiring more and more properties over a short period of time. Good and bad. The gearing mustn’t be too high and when economy slides, even a very little bit, the strain will show. Here the Market Interest Rate is very important to this sector. (Our monetary policy is upward pressure on interest rate so far). They, AXIS, do not have much reserve. 90% of rental income distributed quarterly. To expand, they raise more money!

Also, one thing I hate about AXIS is that when the company raise money to acquire new properties, they do not offer the new shares to the existing share holders. I never was offered. Then when the “deal” is done, there is an increased in the number of total shares in the company with each new acquisition! How was the shares sold? A big question mark?

 

July 22, 2010 10:07:00 AM GMT+08:00

Why REITs should be the choice of investment

KUALA LUMPUR: Real estate investment trusts (REITs) offer many advantages to investors who are keen to invest in the property market.

Axis REIT Managers Bhd chief executive officer Stewart LaBrooy said what was important now to REIT players was to educate them on the benefits on investing in REITs.

“We need to educate them as most of them are not really aware of the advantages, such as having a higher yield compared with some other investments,” he said yesterday at the Investor Insights into Malaysian REITs in 2010.

As a result of the lack of awareness on REITs, he said, the participation from Malaysians in REITs was still small compared with other countries.

“We have 13 REITs now listed on Bursa Malaysia that cover all types of industries. With a high dividend yield of about 7% annually, low entry cost and support with higher corporate governance, REITs should be the choice of investment,” he said, adding that the size of assets of Malaysian REITs was now about RM16bil.

In REITs, a pool of money from investors is invested in properties such as office buildings or shopping malls and the investment is managed by REIT managers.

LaBrooy said another advantage of investing in REITs was the tax efficiency where investors were taxed only once.

“Apart from that, it is easy to invest in REITs as you can buy it today and sell the unit tomorrow, similar to equity stocks. Plus, REITs are a hedge against inflation,” he said, adding that they were low risks and a passive type of investment.

He said the way REITs did its business was to make sure about 90% to 100% of its retained earnings before tax were given back to investors.

“Last year, despite facing a global economic crisis, Malaysian REITs were still giving back about 70% to 80% of its retain earnings to investors,” he said.

Meanwhile, touching on the outlook of residential and office market in Malaysia, CB Richard Ellis (M) Sdn Bhd executive chairman Christopher Boyd said overall, both markets were still stable.

“For the residential market, we are still in the safe net as in Malaysia, developers are still using the method of sell-first-before-build. If you build first then sell like what is done by some other countries, then you will risk yourself of not getting buyers if suddenly problems arise, such as the economic downturn, ” he said.

SUNWAY REIT

First day debut on 8/7/2010, drop from reference price of 90sen to 88.5sen, not a bad start indeed. There will be a refund of 9sen after readjustment of IPO price from 97sen to 88sen for retailer.

Sunway REIT covers retail business of 53%, hospitality 40% and office 7%. Is the largest REIT in Malaysia so far, with properties valued at RM3.73b as of Feb 2010.

Initial portfolio of properties comprises of real estate in the retail, hospitality and office sectors in Malaysia, namely:-

a) Sunway Pyramid Shopping Mall

b) Sunway Carnival Shopping Mall

c) Suncity Ipoh Hypermarket

d) Sunway Resort Hotel

e) Spa Pyramid Tower Hotel

f) Sunway Hotel Seberang Jaya

g) Menara Sunway

h) Sunway Tower

As Sunway REIT 86% of properties is located in SUnway Integrated Reosrt, one of Malaysia leading tourist attractions, this would mean that the mix of properties and attractions would generate higher rental & occupancies for its properties. Sunway REIT intends to leverage on its competitive strengths to optimise results and further seek properties that are yield-accretive and have growth potential in its DIV/DPU or NAV per unit contribution.

Sunway REIT IPO may be fully covered

Applying IPO just became much more easier nowaday. I used to do it over the ATM machine but not any more until i decided to apply for Sunway REIT IPO via M2U. By just merely clicking some buttons and my application just went through without much hassle in seconds i believe, everything done electronically, no form, money order or bank draft required. This is just ease so much comparing previously where we have to grab forms for good IPO. Not any more. :) Thanks God that Technology help to fasten the process, tighten the security and easing the application.

*********************************************************************************

The institutional segment of the initial public offering of Malaysia’s largest real estate investment trust, Sunway REIT, has been “fully covered" at above 90 sen per unit, two sources with direct knowledge of the matter said.

But Sunway REIT may have to price its IPO at the lower end of its indicated range because of deteriorating market conditions, the sources told Reuters on Thursday.

“The book is fully covered. It’s oversubscribed by about 1.2 times now. It’s quite an achievement given the current market conditions,” said one of the sources, who asked not to be named because he is not authorised to speak to the media.

The company last week set the indicative price range for the sale of 1.6 billion units of the REIT at between 90 sen and 98 sen per unit.

This means the IPO could raise between RM1.44 billion to RM1.57 billion.

Sunway woos REIT cornerstone investors

Largest REIT in Malaysia, save some money for it IPO....:)

KUALA LUMPUR: Sunway City may place out about a fifth of its planned IPO of a real estate investment trust (REIT) to cornerstone investors who have greater holding power for the shares, sources with direct knowledge of the deal said.

The country's sixth-biggest property company by market value is in talks with seven local funds in the hopes of getting some of them to become cornerstone investors in the IPO which is expected to raise around $500 million, Reuters reported on Monday, May 24, quoting the sources.

The Sunway REIT, with a fund size of 2.78 billion units, is set to become Malaysia's largest when it is listed in the third quarter of this year.

Sunway's planned REIT offering has received positive response from investors so far due to its size, steady income source and good growth prospects, a source said.

"This is something significant that investors would not want to miss. The interest is definitely there, the question is pricing," said the source.

The sources could not be named because they were not authorised to speak to the media.

The Sunway REIT will feature some 1.65 billion units for public subscription, of which 1.5 billion are for institutional and selected investors, the company said earlier this month.

"They are talking to seven funds, which consist of insurance funds, unit trust funds, government-linked investment companies, and a few pension funds," said a second source.

Sunway is looking to place out about one-fifth of the offering to cornerstone investors, one of the sources said.

Cornerstone investors normally commit to buy shares before a public listing and promise to hold them until a later date.

Sunway City declined comment.

The issue price of the Sunway REIT will be determined in a book-building process.

Earlier this month, Sunway City said it would receive 2.7 billion ringgit in cash and about 1.0 billion units in the REIT for the eight PROPERTIES it will inject into the unit.

The properties, comprise of shopping malls, office towers, and hotels, have a combined market value of about 3.7 billion ringgit.

Sunway City Group, controlled by Malaysian businessman Jeffery Cheah, will own about 38 percent of Sunway REIT after the listing, which the company said may be completed mid-July. -Reuters

REIT market to swing upwards in value

More information on REITs.......

KUALA LUMPUR: Malaysia’s real estate investment trust (REIT) market is expected to swing upwards closer to their net asset value (NAV) in the next six months, with the entry of new players that can attract foreign investors, said Hall Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam.

Besides YTL Corp Bhd’s Starhill REIT, he said the bigger ones that could cross the RM4bil threshold include Sunway REIT, which has a stable brand name including Sunway Resort and Monash University.

“The moment an individual REIT achieves a value of RM4bil, it will attract foreign investments.

“Foreigners may put in US$100,000 into the REIT, or maybe buy 5% or 10% of it,” he told reporters after speaking at The Edge Investment Forum on Real Estate 2010 on Saturday.

He said with a bigger local REIT market, foreign investors may even opt to put a large sum in one of the larger REITs and spread the rest of the investments into smaller REITs.

“Right now, with the exception of Axis REIT, most are trading at about 15%-18% below NAV, compared with property stocks, which are trading at 30% below NAV,” he said.

Among those that are expected to trade closer to NAV are Quill Capita Trust, Axis REIT, Starhill REIT and UOA REIT as they have plans to attract foreign investors, he said.

Tharmalingam said the NAV would also rise due to the revaluation of undervalued properties such as those under UOA REIT. — Bernama

Sunway City undertakes corporate exercise for multi-billion ringgit REIT

Another REIT for your consideration soon. :)

KUALA LUMPUR: SUNWAY CITY BHD group is undertaking a corporate exercise to unlock the value of its PROPERTIES which will see it injecting its shopping malls, office towers, hotels and hypermarket into its proposed multi-billion ringgit Sunway real estate investment trust (REIT) which will be listed on Bursa Malaysia.

SunCity Group said on Wednesday, April 7 the proposed properties include the Sunway Pyramid shopping mall; 19-storey, five-star Sunway Resort Hotel & Spa; nine-storey Pyramid Tower Hotel; the Menara Sunway office tower block; five-storey Sunway Carnival Mall in Penang; 17-storey Sunway Hotel Seberang Jaya, SunCity Ipoh Hypermarket and the 33-storey Sunway Tower.

The corporate exercise also includes Sunway City disposing of three parcels of leasehold land, measuring 19,406 sq metres in Selangor, to its subsidiary -- Sunway Pyramid Sdn Bhd (SPSB). Sunway City owns a 52% stake of SPSB while the other 48% stake is held by Reco Pyramid Sdn Bhd. The princiapl activity of SPSB is operating a shopping mall.

Sunway City has also proposed to acquire 48 million shares or 48% of SPSB from Reco Pyramid (M) Sdn Bhd (RPSB) and 9.6 million shares or 48% stake in Sunway Resort Hotel Sdn Bhd (SRH) from Reco Resort Hotel (M) Sdn Bhd (RRHSB).

Sunway City said the Sunway REIT's investment objectives is to provide the unitholders with an exposure to a diversified portfolio of authorised investments that will provide stable cash distributions with the potential for sustainable growth of the net asset value per unit.

"Subject to the approvals of the relevant authorities, Sunway REIT proposes to undertake a public issue of units in Sunway REIT and subsequent listing of and quotation for its entire issued and paid-up units on the Main Market of Bursa Malaysia Securities Bhd," it said.

Sunway City said the proposed disposal of SCB land and properties will allow the group to realise their investments in the properties.

The proceeds from the proposed disposal of SCB land and the proposed disposal of properties will be used to acquire land bank, working capital, future business expansion and to repay the group's borrowings.

It added the disposal of the land and properties will also enable the group to enhance the development of the real estate investment market in Malaysia through its proposed holdings in the units in Sunway REIT as well as its involvement in the management of Sunway REIT upon the completion of the proposed listing.

Sunway City said upon disposal of properties to Sunway REIT, RPSB and RRHSB would sell their 48% stake in SPSB and SRH to Sunway City. Sunway City also agreed to acquire their 48% stakes.

This would then see SPSB continueing to operate Sunway Pyramid Shopping Mall as a premier shopping mall with ice rink and bowling facilities. SRH, which will enter into a hotel master lease with Sunway REIT, will continue to operate Sunway Resort Hotel & Spa and Pyramid Tower Hotel.

Useful Information About REITs

Some useful information about REITs.

High Dividend Yield Stocks

Above the latest REIT closing price as at 2/3/2010.

As one should know by now, dividend play an important role in cushioning your share price, it is also serving as a good catalyst driven the share price up when a good result is announced with better dividend payout. Refer to my previous posting for dividend here and assessing REITs here.

Another important factor is “timing”. Yes, the date for REITs dividends to be paid. It is utmost important that any good result couple with higher dividend will somehow spur some excitement on share price. All REITs have a tendency to pay 90% of it net profit to shareholder as dividend or other may call it income distribution in which I find it very attractive, thus, it is worth taking a closer look if one were to opt for long term dividend and steady income "for living". Generally below are the dates of month that we should focus on :-

JAN     Ahp, Alaqar, Arreit, Atrium, Axreit, Bsdreit, Hektar, Qcapita, Stareit, Twrreit, Uoareit

MAY    AMFIRST, ATRIUM, AXREIT, HEKTAR

AUG     Ahp, Alaqar, Arreit, Atrium, Axreit, Bsdreit, Hektar, Qcapita, Stareit, Twrreit, Uoareit

NOV     AMFIRST, ATRIUM, AXREIT, HEKTAR

Knowing the months which draw nearer and REITs that may announce dividend, we may at least gauge when to increase or reduce our stake on them. Preferably holding most of it when the value you think is right and engaging them in long hual for its dividend. So, put a little effort there and enjoy picking your REITs and building up your wealth. Till then happy trading and couple with my favorite quote “May The Best Price be Yours”.

Axis REIT plans new acquisitions

2010/01/21

Axis Real Estate Investment Trust (REIT) plans to acquire another three to five properties in 2010 and raise

RM113 million in the early part of the year. Its target was expand the total assets to at least RM1 billion from

RM907.7 million as at December last year, said Axis REIT Managers Bhd Chief Executive Officer Stewart

LaBrooy.

Axis REIT Managers is the promoter of Axis REIT. LaBrooy said the potential acquisition targets included

two units of brand new logistics warehouses in Johor, a factory or warehouse in Puchong and an office

building in Cyberjaya. The acquisitions will total RM180 million.

As at Dec 31, 2009, Axis REIT had 21 properties in Malaysia.

In a media briefing on Axis REIT's financial performance for last year and its future growth prospects, he

said: "We are positive about our financial results this year despite the soft property market.

"Our strategy is to maintain occupancy rates and make new acquisitions." He said the trust also planned

another capital raising exercise in early 2010. "There is potential to place out another 61.4 million units and

raise a war chest of RM113 million for future acquisitions," he disclosed.

LaBrooy said that among other developments for this year would be on its corporate property in Petaling Jaya

called Quattro West which was formerly known as Nestle House.

"We are undergoing a complete refurbishment of the building to reposition the asset and increase revenue," he

said.

He said Quattro West would be taken up by another listed company that had committed to a 15-year lease of

50 per cent of the space commencing July.

Another property that would provide unitholders with opportunities for capital gain was the proposed

acquisition of two logistics warehouses in Seberang Perai, Penang which was expected to be completed by

March.

The Seberang Perai warehouse acquisition at RM24.25 million, he said, was at a 9.2 per cent discount to

market value and would provide unitholders with a cpaital gain of approximately RM1.78 million.

"The acquisition will increase gearing level from 34.03 per cent to 35.61 per cent," he added.

LaBrooy said 35 per cent would be the trigger point for gearing level and should it touch above this level,

Axis REIT would a undertake private placement to bring it down.

Axis REIT's unit price, he pointed out, saw an improvement at the end of 2009 as compared to end of 2008.

"It closed at RM1.93, a 72 per cent increase from the 2008 closing price," he added. -- BERNAMA