This has been explaining before mainly because of tax incentive.

Z Company has a freehold office building for its own use.
In Z company P&L, the office building itself is not an expenses, company only can claim through capital allowance which reduce the tax.

Now Z company sell the building to Z reit and Z company rent the office from Z reit. So nothing change in Z company operation and office.
But now rental is part of expenses of Z company, which is tax deductible.
While Z reit giving out the profit made with tax free. (if witholding tax being abolished)

This post has been edited by cherroy: Oct 9 2010, 11:02 AM

No, as long as reit is paying 90% of their profit, only witholding tax applied.

To promote reit industry, aka develop capital market. Gov may lose a bit in the direct tax issue, but if reit market flourish, it gives incentive to the properties market to grow eventually the economy, which indirectly can bring in more revenue to gov. Just like Free trade zone concept.
Just like stock market.

Reit is a public trust fund to start with, it cannot be a private entity.

Broking firm and banks are both independant entity, HL-ebroking is HL-ebroking, HL bank is HL bank. They are not related, although one might be the subsidiary company of the bank.

Reit is traded as ordinary shares, so you need to go for broking firm to buy/sell.

Yes & No.

Yes, if there is huge property bubble bursting, surely affecting reit. As valuation of property will come down, rental rate pressure etc.

No, locally, yes, there is some bubble, but not as big as worrying as what had happened in overseas, especially like US RE bubble, or China RE bubble.

The major worry of locally reit is about economy growth/recession, as those office space, industrial reit (which mostly in this catergory), is highly depended on economy situation.

Also, recent property fever is more on residential market, which almost all local reit has no exposure in this sector.

Wow, they have the crystal ball!

Which and which properties being injected is not yet known, they already can come out with some yield number?

Even use back the old properties portfolio, I don't know how to find a 11% yield.

Sold to Starhill Global Sg

Yes, reit can be a place for dumping properties, so does ordinary listed IPO. We have seen many IPO, major shareholders treat it as dumping site as well.
But we can't say it must be across.
If worry about cooking the book, ordinary listed company has even higher risk.

I don't mean reit is a safe place to be, just for any investment tool, there is every chance people taking advantage of the situation. Even some receivable in ordinary listed compoany account also can be fake.
At least rental collected must be real hard cash, if not, it is very easy to spot, as reit needs to distribute >90% of the income, if the rental is not collected and in cash form, very easy to spot.
Unlike ordinary company, sometimes, it is not easy to spot or pin-point something fishy before it is too late, as reit account is more straight forward while ordinary company operation can be very complicated.

If feel fishy and uncomfortable with the valuation, then just avoid it.

I won't worry on too much on this, as there is likelyhood, something implemented, if will continue to go on especially when your neighbour country is under tax exempted policy.

In current worldwide environment, 7% is considered pretty high return rate.

Very little investment product can come out with 7% yield (if capital appreciation doesn't take into account).

10 years US treasuries 2.6%
Aussie FD (considered one of highest in the world) 4.5%
Malaysia FD around 3%.
Own your residential properties, most around or below 5% net yield only.
Ordinary stock dividend, 5-6% is considered high already.

If you expect a 14% yield, sorry, none. Except when fire-sale time, especially during crisis unfold.

There is one time Axreit got 14% yield, during 2008, when it dropped to Rm1.00, with DPU around 14 cents.
But this was during financial crisis, and lot of risk and uncertainty involved that time, issue like :
1. Re-financing of loan might not able to get, which could trigger the fire-sale of reit properties and collapse of reit,
2. Can't get tenants due to severe recession etc.

Please don't, reit is never the same with FD.
There were reit collapse as well, particularly during 2008 (particular overseas one with high leverage one)

There are some risk exposure, it is not a FD.

There is no such thing of asset with lower NAV.

NAV = Net asset value + cash

If you want to inject/acquire new properties, what do you do?
Buy
Buy need cash.

If you use the Rm1 mil to buy RM1 mil worth of asset, the NAV still remain the same at Rm1 mil
NAV will be lower with below condition

1. NAV only will be diluted if you use Rm1 mil to buy a Rm900K properties.

2. Issue new share at a price below existing NAV

3. Company make a loss

4. Properties revaluation resulted in a loss.

We need to know why, as we are just aftermath of greatest financial crisis, that cause a lot of oversea reit meltdown, so skeptic on reit is still everywhere.

While currently, economy is seems to be stalling, and people only willing to buy reit at discount rate. Nobody want to pay a premium on them as some investors may still scare about the market.

If flip back prior before 2008 crisis, reit was trading at premium mostly because the properties market looks rosy.

It is about investors risk appetite and optimistic about properties and particular reit sector.

You need to look on yield issue to compare with as well.

For eg.
A reit with NAV 1.00, but DPU only 5 cents. Little people want to buy this reit above the NAV, as yield is not attractive at all if above NAV level.

B reit with NAV 1.00, but DPU is 10 cents, most investors willing to pay above the NAV to get this reit, and yield is attractive.

Do remember, NAV is adjusted upwards due to property revaluation, but yield/rental wise will remain the same until there is renewal of lease with upwards revision on the rental rate.

Reit price moves more towards on yield issue as compared with NAV.



This post has been edited by cherroy: Nov 2 2010, 01:51 PM

The one I eager to know is Stareit, aka their Q report without Starhill & Lot 10, and new properties injection.

I want to buy more.

---

Added on November 3, 2010, 3:44 pmThis is titanic, so no follow follow one.
Only you jump, I jump.

Then sink....

This post has been edited by cherroy: Nov 3 2010, 03:45 PM

Actually, annualised figure is a useless figure.

This is million dollar question, that no one can answer.
From experience, buy back ex-div a lot of time back-fired.
As ex-div deduct 2 cents, and the stock might just stay there and drop 1-2 cents, you gain nothing in the process, all gone to broker commission.

Either you view the price is high then sell or keep for dividend.

At 1.05, it is about fairly value already. On par with NAV, yield at gross 8%.

Don't mean recommend sell or hold, just this is about individual choice.

Yes, your concern is reasonable, (which is my concern as well back then when buying Amfirst, and reason why I allocated smaller portion into it.

But still it is 8% yield
Amfirst expected DPU will be around 10 cents
10/120 = 8.3%

Arreit expected DPU 7.2 cents
7.2/90 = 8%

Qcapital expected DPU 8 cents
8/1.05 = 7.6%

Axreit expected DPU 17 cents (this one can improve further compared to others)
17/230 = 7 .4%

So most roughly around 7~8%, as most price are surging lately, if not, average is about 8%.

You need to get into the shoe of fund managers especially foreigner one.
They are having zero interest rate, bonds yield also extremely low due to bond bubble, as compared to 2-4% in bond, 6% is still decent for them.

They need large cap reit for their large appetite.


6 cents DPU/150 = 4%, net yield 3.6%, might as well park in FD, safer.
Doesn't make a lot of sense for people to invest at 1.50, unless we are having properties bubble to drive it to this level.

In order for it to rise to 1.50, you need DPU improvement to around 7-8 cents at least to justify the rise.

Yes, no doubt, CMMT kinda like management is a strong selling point as well as its properties itself. I also like CMMT very much as well, just yield wise always make me think twice.

Rental won't be increasing dramatically, always very gradual one, as some lease may last 1 year or more, so don't expect sudden jump in rental income.
It is same across reit.

There is always some premium going on for large cap vs smaller cap.

Because too big to fail is a strong theory...... which I learned during 2008. (this sentence joking only).

Got it for sometimes already, probably last year.
Forget what price liao, 0.78 or 0.80, something like that.
Not many though.

I always buy in several trench, (kedukut/buying vegetable style), no matter reit or ordinary stocks, so always forgot what price I bought.