Investment: REIT attraction for long-term investors

From The Edge Malaysia
28th Jan 2014

A SCALE back of the US Federal Reserve’s bond-buying programme and the possibility of rising interest rates have reversed investor sentiment on real estate investment trusts (REIT), sending prices tumbling. Going ahead however, as yields begin to rise, there could be some decent buying opportunities emerging in the sector for investors willing to take a longer view.

With yields in excess of 6% for some mall REITs and 7% for office REITs, there is only a small opportunity cost from holding REITs while taking a medium-term view. At the same time, there is room for upside through capital gains.

Dividend yield lowest in five years; loses appeal amid current market rally

From Star Online: Business
6th Jan 2014

PETALING JAYA: The past 12 months have seen a great run for the stock market, with the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) registering more than 10% gain for the year.

But the surge in blue chip stock prices have pushed dividend yield for quality companies down to their lowest level since 2009.

A quick check showed that Malayan Banking Bhd’s dividend yield is the highest at 5.57% among the top 30 counters that make up the FBM KLCI, followed by Maxis Bhd and British American Tobacco (M) Bhd with commendable 4.5% yields for both.

This is higher compared with the index’s dividend yield of 3.28%, according to Bloomberg data.

Yield play has lost some of its appeal, with prices of real estate investment trusts (REITs) taking a hit in recent months amid a switch to the bond market

CIMB Research maintains Neutral outlook on Malaysian REITS

From The Star Online: Business
By CIMB Research
7th Oct 2013

KUALA LUMPUR: CIMB Equities Research is retaining its Neutral call on the Malaysian REIT sector as the dividend yields of 5.1%-5.5% for FY13-14 are not particularly attractive relative to the 3.98% yield for 10-year MGS.

Highlight REITs lose lustre as bond yields rise

From The Edge Malaysia
26th Aug 2013

KUALA LUMPUR: Real estate investment trusts (REITs), the darling of risk-averse investors a year ago, are losing their lustre as investors switch to government debt papers, the Malaysian Government Securities (MGS).

This comes as the yields of MGS rise with the outflow of funds following the US Federal Reserve’s impending move to reduce its asset purchase that has been in place since 2009.

An Affin Investment Bank Bhd analyst told The Edge Financial Daily that when REITs were the flavour of investors, the gap between MGS and REIT yields was apparent.

“Back when government bonds yields were at 3%, they were about 100 to 150 basis points lower than REIT yields. Now, the difference is not that much. Investors who are looking for REIT stocks now are only buying for acquisition growth,” the analyst said.

Myriad headwinds for M-REITs

From The Edge Malaysia
19th Aug 2013

Prospects for real estate investment trusts
(REITs) listed on Bursa Malaysia are likely to stay muted for the foreseeable future.

Whilst REITs had fared well previously, when excessive liquidity and historic low interest rates pushed investors into seeking higher yields in these investments, the trend has reversed in recent months.

Even though unit prices for most of the larger, more liquid trusts have corrected over the past month, their expected returns do not appear any more attractive, given that risk-free returns on government bonds have risen in tandem.

Hwang DBS retains Quill Capital on Buy, RHB Research says Sell

From Star Online: Business

2nd August 2013

 

KUALA LUMPUR: HwangDBS Research is maintaining its Buy calls on real estate investment trust Quill Capital Trust but is revising its target price to RM1.40 from RM1.45, while RHB Research says it’s time to Sell.

According to HwangDBS Research, QCT’s first-half earnings were well within estimates, noting that the 4.1 sen dividend declared amounted to a 94% payout but said it was cutting earnings estimates for the financial years 2013-2015 by 5-8% because of softer rental reversions and the zero contribution to earnings from their Quill Building 10 in PJ’s Section 13.

The second quarter net profit at RM9mil was 3% lower year-on-year (plus 10% q-o-q) on slightly lower revenue and weaker net property income margin.

“We attribute the lower revenue to vacancy at Quill Building 10 – a result of high office space supply and attraction of newer office buildings (QB10 is now seven years old),” it said.

REITs yield in for compression

From Business Times

13th July 2013

MALAYSIA'S in-vogue REITs sector might come under pressure after a top research firm warned a compression in yields will affect margins.

"Higher yield will make new acquisitions tougher and new debt funding will be more expensive as banks are expected to raise lending rates," the research firm warned.

Yesterday, RHB Research advised investors to reduce their exposure to local REITs (real estate investment trusts) and downgraded the sector to "underweight" from "neutral".

Malaysia's industrial land prices rise to unreasonable levels

From Star Online: Archieves

2nd May 2013

KUALA LUMPUR: “Chronic” speculation has driven up prices of industrial land to outstrip even that of some advanced Western countries, said Malaysian Real Estate Investment Trust (REIT) Managers Association chairman Datuk Stewart LaBrooy.

Citing an example, he said the cost of industrial land in Germany, at RM20 per sq ft, was now cheaper than Malaysia.

“I can't find land for RM20 per sq ft here unless it is a swamp, in which case it would need a lot of money to rehabilitate.

IGB REIT to raise RM838m

By Star Online: Business
10 August 2012

PETALING JAYA: IGB real estate investment trust (IGB REIT) expects to raise RM837.5mil from the initial public offering (IPO) of 670 million units on Bursa Malaysia's Main Market.

The IPO represents 19.7% of the REIT's total listing of 3.4 billion units. Based on a retail price of RM1.25 per unit, the total market capitalisation of IGB REIT upon listing will be approximately RM4.25bil.

IGB REIT, a unit of property developer IGB Corp Bhd, said in its prospectus exposure issued to the Securities Commission that it intended to distribute up to 100% of its distributable income for the period commencing from the date of establishment until Dec 31, 2014, and subsequently at least 90% on a half-yearly basis.

REITs stand to gain, defensive qualities will shine in current trying times

By Star Online: Business
4 July 2012

PETALING JAYA: Real estate investment trusts (REITs), which focus on higher-than-market average yields, will stand out in the current uncertain economic and market environment due to their defensive qualities.

The impending listing of IGB REIT and KLCC Property Holdings Bhd's planned REIT could potentially raise investor attention to a sector otherwise viewed as a low-beta proxy to the economy.

Analysts contacted by StarBiz said they did not discount the possibility of eventual increased attention on REITs, saying that this could be a prelude to a re-rating for the sector.

IGB Corporation - Going ahead with REIT of MidValley retail assets BUY

By AmResearch
17 Apr 2012

- It was announced yesterday that IGB's 75%-owned, KrisAssets has proposed to set up a retail REIT (IGB REIT), comprising its two valuableassets i.e. MidValley Megamall and MidValley Gardens. 

- We understand CIMB Investment Bank, Credit Suisse and HongLeong Investment Bank have been appointed as joint global coordinators andjoint book-runners for this proposed IPO. 

- Although not mentioned, we believe both assets would be ableto gain valuation of at least RM4bil or at a cap rate of 6%.

- As we have highlighted in our previous reports, the monetisationmove would unleash a significant revaluation surplus from assets re-pricing,and free up capital for redeployment. 

- The establishment of a REIT would optimise the ownership structureof its prime properties. This move, we believe, is triggered by the highimplied capital values evident in the recent listing of Pavilion REIT andCapitaMall Trust and a flat interest rate cycle. 

- IGB may rake in between RM465mil and RM1.4bil cash, depending on its equity stake in the REIT. We would expect a special dividend and IGB would deploy the freed capital to fund development projects overseas whereby it is looking at opportunities in London and Taiwan.

- There is a further RM1.05bil revaluation surplus in IGB's under-appreciated portfolio of well-occupied office buildings (2.2msf), which are carried in its book at low historical costs. The retail REIT may be the trail blazer for IGB tolaunch an office REIT further out.  

- A hospitality REIT for its hotel assets would complete there-pricing of its assets, transforming IGB to an asset-light fee-based entity with controlling stakes in three listed asset-specific REITs. 

- We maintain our BUY rating on IGB Corp with our fair value unchanged at RM3.50/share based on a 22% discount to our NAV estimate ofRM4.50/share.

Price- RM2.83 

Fair Value- RM3.50

[Source]