Only received Stareit for last week.

May be raining season (rain non-stop for a week already) + lot of holidays delay the postman delivery.

UOAreit
Qcapital
Axreit

also not yet received, all are payment date on 28th.

OK, received Arreit and Qcapital today.

If not mistaken

HLebroking mostly are nominee account.
HLG is the investment bank that got direct account.

Generally those trading portal offered by normal bank like Maybank2U, PBebank, HLe, etc are nominee type account as they are not principally broking firm/investment bank.

Those principally investment banks are like OSK, Hwang are those offering direct account, although they can offer nominee account as well.

See you statement where your shares being kept will know. If you share is kept with Bursa's CDS account, then it is a direct account, if the share is kept with HLe one then it is nominee.

2.00 seems not attractive to buy anymore unless DPU more than 16-17 cents pa.

Yes, your concern is reasonable.

But you get a few points wrong here.

Inject new properties into the reit, won't increase the NTA. You increased the total asset owned but not the NTA, as you need to take loan to purchase those properties.

Also manager fee is based on properties value under the portfolio, it is not based on NTA.
So inject new properties mean more managerial fee, yes, right. More job, more fee, fair enough, as long as it brings benefit to the shareholders.

Inject new properties won't have any dilution effect, if there is no new shares being issued or private placement.

Also even there is private placement which is to fund the new properties acquisition, it doesn't mean dilution effect must occur, as those new properties will increase your income based, as long as those rental income is good, if could offset the dilution effect.

Last year private placement of Axreit doesn't dilute the DPU, instead due to good rental income from the new properties, it increases DPU from 12-13 cents to now a bout 15-16 cents range.

If reit having more properties mean they are more diversified which means risk is more spread out, which is a good thing. Also if properties market goes up, it might benefit more.
We had seen how Atrium which only have 4 warehouses, one of the warehouse tenant moved out, it impact severely its DPU.

You raised a good point, but reit wise situation is 3x better than UT. UT managers charge fixed 1.5% annually, (that's why it is lucrative business to do ) disregard they are performing or not even sleeping.
No offence or discredit the fund managers.

Yes, managers should be getting fee based on performance like x% of total rental income generated which by then there are more incentive for managers to perform better in term of DPU to the shareholders. But if total based on rental income solely, it is a bit no fair to the managers as well. As what if there is period of no tenant, still they need to work and paid for their expenses for looking after the properties and seek for new tenant. We can't expect others totally work for free, right/
Just like if company is not making profit, we can't say give zero wages to the management board.

My view, the better way is to have fixed low amount based on NAV (lower than current) but compensate back with high % of rental income generated.

Reit is a bit different. They cannot reduce liability significantly without private placement because every profit made every semi-annually they need to distribute at least 90% to the shareholders already, so there is little left in the money to pare down the borrowing, while there is cap of 50% borrowing based on NAV which restrict the ability of managers to inject properties.

For good manager, or sleeping manager or manager that inject more properties to increase the fee while benefitting none to shareholders, you or we already can judge from the just like figure you posted. So we knew we have a choice to choose which is better one to invest.

For Axreit case, from shareholders point of view, the increase of manager fee is well justified because the increment of DPU.

While for incremental part of fee, we cannot have same proportion increase in % wise due to mathematically issue as mentioned by your posts, (you cannot have same increment of %) as well as shareholders getting more diversication effect with more properties.

Eg. like below 2 situation will give you clear picture why we cannot say increase in Manager fee must as same as DPU.

Let say reit has 10 million share issued

A scenario
1 property under management, with NAV 10 million with rental income 1 mil.

So manager fee is 50K
DPU Rm0.10

B scenario
Inject another property similar property 10 million and rental income also 1 mil but the acquisition is done/fund by private placement of another 10 million shares issued.

So now manager fee is 100k (100% increase), even you use rental income, it is still the same incremental %.
Total rental income is 2 mil but you have 20 million shares now, so DPU still Rm0.10.


Above clearly show, 100% increase in fee, but no increment in DPU, so can we say, the manager is sucking money?
Not a straight forward answer as you have diversification benefit already in B.

If one said, there is no justification of manager fee 100% increase, so you oppose the acquisition in B and opt A, which is not right also as A is more risky than B.

That's why it is impossible to have same % increment of fee with DPU through properties injection.

Any acquisiton will increase the DPU it is a good deal for existing shareholders, as for current shareholders, we concern about how much increment we can get without forking out a single cent, which we cannot run away the manager fee increase more than DPU due to above example show.

Properties injection is important for reit, because in reit, size does matter in term of attracting instituitional investors as well as diversifcation objective.

This post has been edited by cherroy: Sep 22 2009, 02:27 PM

Yes based on its latest update.

Yup, risk of non-diviersification is quite high, but if turns out to be good, you are getting a yield more than 10% (if there is 100% occupancy), so it is always a trade-off.

For reit, I posted before, I preferred Axreit more, but I got some in Atrium also.

Capital land should be listing in the 4Q, but may delay to next year as well, the postpone is due to poor market sentiment on IPO market. Reit IPO might not received well response, as people here still new to reit.

The capital land proposed to list consist of shopping mall like Gurney Plaza etc.

Capital land owns part of Qcapital, it is not solely owned by them.

Amfirst is expected to give near 5 cents soon.

It is bad for local reit market development.

Witholding tax is not claimable.

Only imputation tax (on ordinary dividend) is claimable.

Reit is under witholding tax.

This post has been edited by cherroy: Oct 12 2009, 04:39 PM

You can claim on the Tanjong's dividend as it is still under old imputation dividend system (or other stocks you have declared without the word single tier)

Wait, your gross income probably already max the bracket, ie. your annual income is already on the highest bracker, so please don't bother to claim back, you are not entitled to claim back. You still save 2%, as corporate tax 25%, personal 27%.

Due to low liqudity across the reit, once there is need for fund manager to dispose, it will cause the particular reit price being depressed.

Reit is not as same as ordinary stock, even the overall market is bullish, reit upside potential is capped by its property valuation and its rental income. So if rental income won't improve too much, there is no reason for reit price to go up like ordinary stocks.

Reit locally generally won't move in tandem with general stock market trend one. They generally move based on its fundamental suggesting.

Reit is not kena dumped across. Just they shouldn't up too much way beyond its fundamental.

While since Australia raise interest rate, there is talk about some central banks are considering to hike interest rate. If interest going up (FD rate), the differentiate in yield between reit and FD become smaller, and less attractiveness for fund managers.

Only if property price going up or rental income increment, it only justifies reit price to go further up.

Reit does partly follow market sentiment, after all everything (in short term) follow general market sentiment, even rubbish stocks also can go up in a bullish market.

But for local reit, due to low liquidity, a lot of time, it tends not to follow market sentiment. As reit still limited to some investors interest only, particularly from fund managers that look for fixed income investment like insurance funds, while only little retailers are participating in it.

Reit fall spectacularly during the crash (in fact everything fall drastically back then) especially in US and UK, because of property market bubble burst, while they are highly geared than what local reit is, and some unable to refinance the borrowing due, which need to fire-sale their portfolio properties at the wrong time so it is not without fundamental change. For local, with serious recession threat, it means future rental or tenant lease renewal could be problematic (that's why local reit also failling quite a lot), Atrium is the classic example whereby DPU falling sharply due to tenant moving out, so fundamental does change.
But right now with recovery and improvement all across, so does prospect of reit.

Axreit is under private placement (50 million shares) just month ago which pare down the borrowing.

Interest going up or not, reit company is not paying back all the money they borrow one (they don't have the money to pay for, as 90% of income is always distributed to the shareholders already). Always refinancing and roll over the loan when due, except through private placement to raise cash or sell the portfolio properties, only they can able to repay the all borrowing

Yes, interest rate goes up does hurt the attractiveness of reit, while mean more interest expenses incurred.

But if interest rate goes up, it means economy is doing well, so generally properties market also in good shape and potential better property value appreciation as well as better negotiation price for the rental.

Reit income is subjected to witholding tax, and not applicable anymore on personal income tax, as far as I know

There won't be double taxation.

Could be, Some do give 95% or 99% as well. Company still need some cash for operation.
The 10% of rental income is peanut figure compared to its overall borrowing. Cannot rely on the 10% left to pay for the borrowing.

Most reit property has yield around 9-10% ie. your property worth 100 million, expected rental income is around 10 million pa.

So if you use borrowing to finance the purchase of the property at 50% gearing, it means you get a loan of 50 million to finance it. Your rental income is 10 million and left 10%, only 1 million. It takes 50 years accumulation before can repay the full amount of the loan. So you cannot rely in the left 10% for repayment of the full loan.

You service the loan, but not pay in full. Refinance is always the key of reit company for its borrowing. That's why reit fall drastically when credit market freeze time during last Oct. as without refinancing available to them when due, they won't able to repay the borrowing, and need to fire-sale their properties.

This post has been edited by cherroy: Oct 14 2009, 11:29 PM

I haven't go through the Q report, but there is no revision on its properties value, if not mistaken, so there won't be any change in the real value of properties.

The decrease of NAV could be dilution effect on private placement which I don't think will be too much because private placement being priced at around 1.6x. (if I remember correctly)

I do thing a bit too optimistic for 2.2~2.4, anything DPU around 2 cents is good enough already.

My opinion only.

Arreit has a nice run up lately, 0.88 already. Some news around?

There is little direct/immediate impact of the property gain tax on the reit side, as reit seldom/never sell their properties since the injection/introduction of reit.

But property gain tax does put some 'cold water' on the property transaction, which affect some on the property market. But I don't think the 5% will be a major issue across, yes it does have some impact, but 5% tax won't reduce the property transaciton too much.