Hardly REITs will be giving out 4% - 5% dividend because they are leasing out prime properties. Even layman like us can gain higher income if we were to just buy an apartment to rent it out. Furthermore these REITs will have to distribute at least 90% of their income in order for them to escape from being taxed. Therefore, if they were to distribute 5%, their income would only be 5.6% PA. Perhaps your friend bought it when the counter peaked. Even so, he would be receiving at least 6% net dividend. Better find out from him which counter he bought to make a better judgment.

From my experience, a person would never discourage someone from buying REITs, unless:
- he is an agent for unit trust/insurance/MLM/investment scams
- he is an aggressive person who only believes in getting quick profits

Sorry if my assumption is wrong. I never meant to degrade your friend, just voicing out my view

Pana,

Yes, it seems that they are paying higher this year at 2.9sen. But it's weird that there's no transaction today

Oh my, sorry for the mistake I didn't read the whole report. But according to normal practices, prices of stocks would increase should there be increase in profit. Guess the case is different with REITs

Cherroy, even if the liquidity is low, I think it should not deter people from investing in REITs because we will be expecting sustainable income through REITs. So normally when we buy REIT counters, we would not think of selling them UNLESS the company becomes insolvent.

This is just my two cents though, but I believe different people would have different perspectives. But I think your perspective on REITs should be similar to mine, so why worry about liquidity issues here?

Lol, true. Sometimes it is quite tempting to sell the REIT counters. I did once on AXREIT, bought at 1.18 and sold at 1.36, later bought back at 1.28 until now. I kept reminding myself not to sell it even when the price hit 1.50 because now I am on accumulation phase. My aim is to accumulate as much as possible since the price is still low. Now the stubborn AXREIT is not going below 1.40 , so I might be looking to diversify into either UOAREIT or AMFIRST.

I see UOAREIT as more of a gem because of their expertise from their Australian counterpart. Not really so into AMFIRST because of their investment in Summit. It is a place which I don't really like to visit (except for climbing gym )

I have shortlisted the few probable targets for PKNS:

AXREIT
HEKTAR
QCAPITA
ALAQAR
BSDREIT

Take your pick

Buying controlling stake does not mean their management will change. They may be controlling the company, but the management could still be the same. I don't think their intention is to run the REIT company, but just to leave the company on auto-pilot while they earn without doing anything.

That could be one of the reasons Any idea on how much are PKNS properties yielding?

You could be right. So what's left now would be:

AXREIT
HEKTAR
QCAPITA



And could they be only eyeing REITs concentrating in Selangor? Since they are owned by Selangor state, they might be buying stakes into REITs with properties in Selangor. Just a thought

This post has been edited by Jordy: May 15 2009, 02:19 AM

In my humble opinion, AXREIT is the least probable target (at least the in the major shareholders' concern) because the four partners worked hard to build their empire. It is very unlikely that they will let go of their stake (especially in Lee Lao's case). Unlike HSBC, Baiduri has no other primary businesses, if they let go of their one and only primary business, they will be out of business PKNS can never gain the controlling stake (Baiduri + Lee Lao + Tew + Abas has a combined stake of 27.8% while EPF + Valuecap has a combined stake of only 13.5%).

In QCAPITA's case, even if HSBC lets go of their stake, they still can focus on their finance business. Real estate is not HSBC's primary business, they invested in QCAPITA only for profit. So if PKNS is able to pay at high premium, I believe HSBC would let go. I am not very familiar with Quill though, so I don't know if they would sell their stake.

"Selangor State Development Corp is said to be negotiating to buy a controlling stake in a listed REIT with total assets worth more than RM600 million"
As a reminder, they stated that the total assets are worth more than RM600 million, so it doesn't necessarily be within that RM600 million range. RM800 million is still more than RM600 million. So it is still right to say QCAPITA is in the running as well

Nestle House has been vacated since December last year, so it is not affecting its earnings because we can see a stronger income in Q1. Q1's earnings was without Nestle House I believe, so Q2, Q3 and Q4 should be the same

This PKNS will really disappoint us if they buys AXREIT. NONE of their properties is yield-accretive. These 4 properties will simply jeopardize our investments. I just hope that the 3 partners will consider the minorities and not sell their stakes

For sure they will inject at premium because PKNS won't play the losing game

Now I am considering whether to hold or to sell since I am still in the money. Didn't sell at 1.47, if not I have more cash to buy back at this point

Haha, since I've missed the selling opportunity at 1.47, I am queuing to buy at 1.34. This will make my average price up a bit but I want to accumulate as much as possible

Couldn't get it at 1.34, so I bought 10 lots at 1.35 I'm on the view that tomorrow it should rise again. There is no reason the price got beaten so low.

If you want other high yield REITs, consider AMFIRST. The yield looks ok at its price today (9.3%) and still has room to grow. Its NAV stands at 1.325 now (discount of 30%).

This post has been edited by Jordy: May 18 2009, 05:29 PM

Oh my, you guys want to wait for 6 months and lose on 2 interim distributions? I will still go with AXREIT for now (for distribution), unless PKNS revealed that AXREIT has accepted their terms. I trust that AXREIT management will not sell

Remember what I said yesterday? No reason for the price to go down

I am eyeing UOAREIT. It is getting as stubborn as AXREIT now

I guess we can applaud our Malaysian system at times like this. Those economies with property bubbles are facing the music now for their greed (namely US, Europe, Australia). That is why our REITs still stable. On why our REITs plunged when property bubbles burst and global recession, is because of fear. It's common for people to fear. Just like yesterday when AXREIT dropped, people scatter. Fearless people who bought at 1.35 yesterday can already earn 5sen today

So we can easily predict REITs, that is why I am sticking with REITs. I am not going to get involved with normal stocks until I have extra cash

P.S. I even sent an article to Personal Money "Question of the Month" section on REITs, due to release for next month's issue. I hope I can be one of the featured article

On QCAPITA, I think some of you might want to rethink your decisions. A rough study on the annual report tells me that they are holding to some low-yielding properties (as low as 1% pa). So, I don't really have faith in its management as their cash is not utilized efficiently. I will do a more thorough study on its property yields and post it here later.

This post has been edited by Jordy: May 20 2009, 08:35 PM

Done a thorough analysis on some of its properties today (couldn't do more because the management did not disclose the income on other 5 properties). Here are the results:



By looking at the results, we can see 4 properties out of 5 analyzed were receiving low yields. These 5 properties have an average yield of only 7.46% (below average yield for REITs).

Let us take a look at the average yield of the other 5 properties:

Net total annual income (a): RM 12,706,037
Total purchase price (b): RM 319,000,000
Average yield (a / b * 100%): 3.98%

Well, this simply means that the average yield on all 10 properties is (7.46% + 3.98% / 2) = 5.72% (still well below average for REITs).

Anyhow, this yield is just an estimate by using some calculated assumptions based on FY2008's figures. The yield should not increase unless there are positive reversions done this year. Otherwise, we will be seeing another year of low yield.

I am only wondering how did they manage to pay its investors a gross yield of 8.16% (net yield 7.35%) for FY2008 while it is earning a net yield of only 5.72%. Still, if they were able to maintain 7.51 cents distribution for FY2009, those who bought at 0.84 would only be yielding a net of 8.05%.

If any of you who have also conducted a study on QCAPITA and found a mistake in my analysis, please do correct me. I am just hoping everybody would be informed of the actual situation before someone really gets stuck with QCAPITA.

P.S. Just to add onto my comments, another reason I do not have faith in its management is due to the fact that they are not being fully transparent in their report. A good management team would disclose the full breakdown of their income in its annual report. This must be taken into consideration before choosing the stocks to buy.

This post has been edited by Jordy: May 21 2009, 04:52 PM

Your statement is correct, but many of their properties are yielding below 7%, while its average yield for all 10 properties is only 5.72%. I am just worried that its management team's ability in sustaining its growth.

Hi Neo,

Why I used purchase price to calculate? Simple. Because I want to calculate its ROI (initial purchase price = initial investment). NTA is not a good base of calculation because it has taken into account the revaluation, therefore we will not see the real picture

The initial investment for all 10 properties is RM 715,146,000, while after their revaluation, the assets now are worth RM 816,013,468. The only risk is on its management's inefficiency and transparency. But I do agree with your argument that at 0.84, our friends here are buying at a discount of 31%, which creates a very comfortable buffer

This post has been edited by Jordy: May 21 2009, 05:28 PM

Great! I don't think that was a lot of help, but seeing my fellow investors here are better informed now gave me a great satisfaction

It is under KLSE "Annual Reports" and NOT "Announcements". You can find it at http://www.bursamalaysia.com/website/bm/li...ports/index.jsp.