Thursday 3 November 2011

Bursa REITs at A Glance

A lot of people may dream of being a property investor. Nevertheless, not many people can actually take their first step into property investment or even if they have started, failed to be successful.

There are a lot of obstacles in property investment: inadequate capital, inadequate personal income for loan repayment, fear of owing bank money, not willing to pay interest to bank, fear of interest rate hike, fear of buying into wrong property or location, fear of project being abandoned, fear of economy downturn, fear of property bubble, fear of trying new thing, fear of hassles and hidden cost in property transaction, fear of problematic tenants, fear of unknown etc.

I think that the ultimate goal of every property investors is to own a good commercial property which can give higher and more consistent return. As commercial property is relatively much more expensive than residential, most investors will not have the ability to own one. 

However, now everyone has an opportunity to "own" and "collect rental" for commercial properties without any hassles, through REIT (Real Estate Investment Trust). REIT is like unit trust, where you contribute any amount of money you wish to a REIT management, who will manage and maintain a few commercial properties that generate rental income. The profit will be distributed back to you according to how much money you have contributed.

REITs are considered a conservative investment vehicle which usually yield higher return compared to bond and fixed deposit. They are easy to buy and sell as they are listed in the stock market. Besides getting distribution (dividend) on a regular basis, the stock price may also rise when the REIT's income rise.

Below is the total distribution (in sen) of REITs listed in Bursa for the most recent 12 months, in 2010 and 2009. You can compare them to judge how well the REITs perform.

REIT Last 12mth 2010 2009
AHP 7.30 7.20 7.00
ALAQAR 8.47 7.73 8.10
AMFIRST 9.42 9.75 9.75
ARREIT 7.08 7.32 7.16
ATRIUM 8.60 8.60 6.95
AXREIT 18.25 16.00 15.80
BSDREIT 10.20 10.00 9.30
CMMT 7.30 8.43 n/a
HEKTAR 10.30 10.30 10.30
QCAPITA 8.18 8.03 7.68
STAREIT 6.49 6.49 6.49
SUNREIT 6.82 6.58 n/a
TWRREIT 10.65 10.00 10.00
UOAREIT 9.70 9.97 11.50

The total distribution does not tell how much the REIT's unit holder can get in return. We need to calculate the distribution per unit to know its yield.

Which of those REITs give the best yield? A property investor usually aim for a yield or return on investment (ROI) of at least 2x FD rate. Thus, property investment yield should be around 6-7% at the moment. Most REITs listed in Bursa Malaysia do give a yield of 6-8%.

Here is a list of ROI for REITs, base on their distribution in 2010 and price on 2nd Nov 2011.

REIT Price 2 Nov 2010 Return %
AHP 1.03 7.20 6.99
ALAQAR 1.11 7.73 6.96
AMFIRST 1.14 9.75 8.55
ARREIT 0.875 7.32 8.37
ATRIUM 1.07 8.60 8.04
AXREIT 2.52 16.00 6.35
BSDREIT 1.45 10.00 6.90
CMMT 1.32 8.43 6.39
HEKTAR 1.29 10.30 7.98
QCAPITA 1.06 8.03 7.58
STAREIT 0.86 6.49 7.55
SUNREIT 1.14 6.58 5.77
TWRREIT 1.24 10.00 8.06
UOAREIT 1.36 9.97 7.33

Of all the listed REITs above, CMMT (CapitaMalls Malaysia Trust) is the most recent addition with some interesting "activities" going on. Its yield does not seem to be attractive at the moment compared to the others.

CMMT which is the only REIT made up of purely shopping malls, is just listed in July last year. It has 3 very good shopping malls in its portfolio, which are Gurney Plaza Penang, Sungei Wang Plaza KL and The Mines Seri Kembangan. It has acquired the extension new wing of Gurney Plaza early this year and will probably add the East Coast Mall in Kuantan to its portfolio by the end of this year. The move will certainly increase CMMT's value, revenue and total distributable income.

      East Coast Mall Kuantan

However, the distribution per unit or the yield may or may not increase much as CMMT is using 100% private placement to fund the acquisition of East Coast Mall. A total of 261.9 million new units will be issued to raise RM330 million (the mall costs RM310 million). This represent 17.5% addition to its existing units which will certainly dilute its earning. The good thing is, CMMT is able to reduce its gearing and save some financial cost in the future.

CMMT mentions that East Coast Mall will contribute about RM20 million net income annually. Using the latest 2011Q3 distributable income of RM29.65 million and 1.98 sen per unit as reference, after the acquisition, CMMT will have a distributable income of RM29.65 + 5 = RM34.65 million every quarter. With its new 1497.7 + 261.9 = 1759.6 million units, its distribution per unit will be 34.65/1759.6 = 1.97 sen, which is almost the same as 1.98 sen before private placement. Please note that these are all rough calculation and assumption.

     Penang Gurney Plaza

CMMT's malls have 99% occupancy rate and are all stand-out malls in the region. Similar to all other REITs, its income can only increase when rental is raised if the market allow, or when it acquires new properties. If not, its income, yield as well as the unit price will stay stagnant, which is why many investors are not interested in REITs.

No comments:

Post a Comment