Apr 12 2010, 10:54 AM
QUOTE(wwloon32 @ Apr 12 2010, 01:39 AM)
Guidelines do change and different company have different revaluation, that leads to two earnings. In the next few years there will be changes and beware of different company that have different revaluation. If guidelines are mean to guide and uniform, why things have different interpretions?
Market share price doesn't reflect yields. REITs do have tendency of dropping even though earning and therefore yield is rising. Given the statistics of mid 2008, when markets did perform average, only half of 12 REITs manage to cling above IPO price, another half sinking below it. It average yield is 7%, compare to 8.5%, still REITs unit price perform sluggish, haven't recover, although earning and yield did improve. As the matter of fact, the top three REITs yield of 2008 unit price did fall, compare to 2010 unit price.
The main things is unit price, it doesn't go along with yields and NAV, it isn't as effective as you thought. If you opened The Edge, you will find our REITs are one of the highest yield in the world. And a point to counter yours, if REITs yields average on 8.5%, which make it more attractive compare to listed dividend counter and our country bond, REITs should attract these capital and make it yield lower in long term, but it didn't happen.
FRS has nothing to do with the reit guideline as said, Guideline provide a guide so that reit doesn't cross the line. I do see any different interpretation. Market share price doesn't reflect yields. REITs do have tendency of dropping even though earning and therefore yield is rising. Given the statistics of mid 2008, when markets did perform average, only half of 12 REITs manage to cling above IPO price, another half sinking below it. It average yield is 7%, compare to 8.5%, still REITs unit price perform sluggish, haven't recover, although earning and yield did improve. As the matter of fact, the top three REITs yield of 2008 unit price did fall, compare to 2010 unit price.
The main things is unit price, it doesn't go along with yields and NAV, it isn't as effective as you thought. If you opened The Edge, you will find our REITs are one of the highest yield in the world. And a point to counter yours, if REITs yields average on 8.5%, which make it more attractive compare to listed dividend counter and our country bond, REITs should attract these capital and make it yield lower in long term, but it didn't happen.
Market is always has some kind of effectiveness. The good example is Axreit.
Axreit earning and DPU has been increasing quite steadily, eventually, reit price also move along and respond to the DPU.
You reward the investors with more earning and yield, then it eventually will lure investors in it.
Yes, local reit market is not as liquid and effective compared to ordinary share, (without liqudiity and volume, effectiveness surely is severely distorted or affected) but there is some kind of effectiveness as well. As we can see most reit price is positioning to around 7-8% in general. So want higher unit price, then company need to deliver high DPU.
The issue/problem about reit is
Locally reit market is very unknown and not understanding to retailers, so eventually there is little retail investors participation, we can see most reit have shareholders around 1K or so only. And somemore retailers in KLSE are more adventurous, they don't want to have something that price is stagnant and move little and trade little one.
To say reit tend to drop, yes, they tend to drop from IPO price, because I don't find IPO price in some reit is attractive because its yield at IPO price is lower than market out there. But it doesn't drop straight line down, as long the reit is having constant income, then the reit market price will be positioning at around 7-8%. So market unit price will react how well their DPU.
For instituitional,
Reit liqudity is not high enough to prompt instituitional investors to dump big into it. The reit size is singificant smaller to attract large instituitinal investors. Even some insurance fund, and UT only invest around a couple million to ten plus millions in it. The size and liquidity is simply too small for reit industry as compared to overseas.
As said before as well, reit has little or not much room for growth due to restriction on borrowing, so with not much room to grow, it is not justified for investors for own a reit if yield is around 5-6% which is just a notch higher then bond market, as having a reit, risk wise is higher than a bond.
If a steady strong dividend stock that carry 6% and a reit also carry 6%, why investors want to choose the reit over dividend stock? While ordinary dividend stock has way much room to grow in ordinary businesses.
Another aspect, overseas like Sg reit income or distribution is not subjected to 10% witholding tax, while Malaysia reit does. So investors will 'discount' this factor on the reit price as well. As investors care about the net yield they are getting. A gross 8% means real yield is 7.2% only.
I no doubt there are problem/challenge on local market reit which summarise a few as below
1. Size
2. liqudity
3. witholding tax
4. Low understanding on reit for local retailer investors.
5. Restriction on borrowing (which I view, it is good)
6. RPT
But to say reit price is tend to go down, or the distribution is the culprit make reit market price going down, is inclusive conclusion. As said, 50% of reit is actually above IPO price, as reflect there is about individual issue on reit itself like quality of their portfolio, management that improve the reit earning etc issue.
It is as same for ordinary stock as well, some perform good, some worst.
This post has been edited by cherroy: Apr 12 2010, 11:48 AM
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