New RPGT 2012

Latest Real property Gain Tax 2012.

If someone flip a new development project within one year, he still can gain 90% from the net profit, not bad really. Personally I think this is not going to stop property speculators from "frying" up the property price. Perhaps it should be 1st year tax 80%, 2nd year 60%, 3rd year 40%, 4th year 20% & 5th year 10%.

As for the 70% loan margin for the third residential property and onwards, IMO it does cool down the market a little bit. This measure will hinder the average-income or new property investor from being successful. However, for those big players, this should be a good news for them as less competition in buying properties. What they have are lots of money.

The rich will become richer.... the poor is hard to get a breakthrough. This is life.

Missed the Harvest Time!

 

If you dump in all your assets to buy Harvest shares at RM0.08 on 12 Oct 2011, you will be 1375% richer now, as its share closed at RM1.18 today. If you buy Harvest's warrant at the same period, it's even better, you will be 2900% richer by now!

Why does a low-volume, unpopular penny stock who was once a PN17 company and makes 17 quarter-losses in its most recent 20 quarters can jump in value more than 100x in less than a month? This is typically called "goreng".

Everything started when Raymond Chan bought 23.808 million Harvest shares at RM0.20 each (13.85%) on 18 Oct 2011. It seems like Chan is going to inject a company he owns, 1Green Enviro Sdn Bhd into Harvest.

1Green Enviro Sdn Bhd is involved in converting palm oil fruit bunches into paper. It is just established on 12 Nov 2010, exactly a year ago, with no track record of earning. Can it raise Harvest to such a level?

The other important factor is that our PM's son, Mohd Nazifuddin Najib, sits on the board of both Harvest and 1Green Enviro! This makes Harvest a strong politically-linked company.

Both Chan and Nazifuddin were just appointed into Harvest's board on Oct 28.

On Oct 27, Harvest announced that Mr Ng Swee Kiat (MD) has agreed to purchase and Affin Bank Berhad has agreed to dispose of the entire 31,410,664 shares together with 7,852,666 warrants held by Affin in HCIB at RM0.25 per share and warrant.

Can Affin say: "Sorry, wait a minute please, can I dispose at RM2.20 per share and warrant now???" Three weeks ago, Harvest's share is at RM0.08 and its warrant is at RM0.035. Now they are at RM1.18 and RM1.05 respectively.

On Nov 4, Raymond Chan purchased another 5.09 million of Harvest shares at RM0.849 to increase his stake to 16.81%. Nazifuddin also bought 1.19% of Harvest shares at RM0.845 for the first time on the same day.

In the meantime, Harvest also announced recently that it has clinched 2 contracts worth RM7mil and RM6mil respectively.

Nevertheless, Harvest made this announcement in Bursa today (Nov 8):

 

Harvest Court Industries Berhad (“HCIB” or “the Company”) refers to the article appearing in The Edge Financial Daily, Page 6 on Tuesday, 8 November 2011 and wishes to deny the following: -

i)   “Harvest Court Bhd is close to acquiring a new business which involves converting agricultural waste into paper”.

ii)   “The asset being injected into Harvest is believed to be a company called 1Green Enviro Sdn Bhd, which is linked to its substantial shareholder Datuk Raymond Chan”.

The Company wishes to announce that there was no discussion on asset injection as stated in The Edge Financial Daily on 8 November 2011.

The Company is subjected to rumours and reports that are misleading and the Board would like to remind the members of the public to trade precaution in regards to shares and warrants of the Company based on fundamental and formal announcements made by the Company.

There is no discussion on asset injection as of 8 Nov, and the discussion will start on 9 Nov? Haha.

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.

Dijaya Prepares to Fly?

In the last 5-6 months, Dijaya has acquired 569 acres of land in Klang Valley and Johor to bring its total land bank to 708 acres, including an one-acre freehold land at Jalan Sultan Ismail! Overall, it is estimated to give a GDV of RM18 billion to the company in the next 8-10 years.

According to CEO Danny Tan, Dijaya is targeting sales of RM500mil for FY2011, RM820mil in FY2012 and RM1.24bil in FY2013. As at September 2011, the company has unbilled sales of RM472mil. However, its revenue in 1H2011 is only at RM128 million.

Dijaya plans to launch RM800mil worth of new projects this year, RM1bil next year and RM1.3bil in 2013.

Date	Projects	Location	Type	GDV RM
Nov 2011	Tropicana Avenue	Petaling Jaya	Commoercial	412 mil
Dec 2011	Tropicana Danga Bay	Johor	Mixed	3.8 bil
Early 2012	Tropicana Cheras	Sg Long	Residential	185 mil
1H 2012	Tropicana Danga Cove	Johor	Mixed	2.8 bil
June 2012	Tropicana Hills	Subang	Mixed	3.5 bil
June 2012	Tropicana Bayou	Balakong	Residential	400 mil
2H 2012	Tropicana Gardens	Kota Damansara	Mixed	1.8 bil

     Tropicana Danga Bay - masterplan

These are just plans. We may have heard before that Dijaya plans to launch some of the above projects this year and now they have been postponed to next year. If the world economy is slow to recover, they may be postponed again.

RM mil	Revenue	Net Profit
2006	180	41
2007	254	49
2008	247	33
2009	311	50
2010	292	45

For the past 5 years, Dijaya makes decent profit but its revenue and profit are quite stagnant. There is no persistent growth like Mahsing & SP Setia. Nevertheless, the profit margin is quite good.

Now, after "consolidating" for so many years, Dijaya thinks it's time to take off and fly. With its ambition and land on hand, Dijaya might have a bright future if everything goes according to plan.

     Tropicana City Mall - PJ