Yes, you are correct. There are two kind of Reits, one is just parent company treat reit as a way to list/dispose their stake in the properties to unlock some value and cash to the parent company and parent company lease back and become a major tenants.

There are pros and cons on these 2 types:

1: Those parent company lease back and major tenant one:
Pros: if parent company financial healthy, then won't be facing any major problem of getting tenants ann income is much depend on parent company.
Cons : The Reit itself is not survived on their own competitive strength and demand for property. So if parent company goes, the reit suffer with it, because it is not depended on free market demand actually.

2: Those genuine reit
Pros : Property itself is competitive in the market and survive and earn on its own merit which is strength of the company.
Cons : Tenants are spread across and not depends on single major tenants (which is a good thing also). But if demand for office and rental place reduce might be suffering loss of income, unlike those parent company is the major tenants one.

For long term, and competitive edge, (2) is preferred. But in difficult period of time, (1) will be seen is more stable/defensive (but risk with parent company).

Just my view.

This post has been edited by cherroy: Jun 27 2008, 11:11 AM

I also join you the party, 1.64.

Yes, Jordy has a point to make, if market turns back up, Reit won't go as high as other.

It is just a defensive play aka if market does fall further, then it somehow has some downside protection but doesn't mean it won't fall, just degree of falling might be lesser than normal stocks.

With inflation looming for construction materials, from cement to steel etc, future properties price has one way to go, i.e. up. Short term wise, properties price might go down because of lesser demand, but over the long term, it needs to go up otherwise there won't be newly construct building and properties as developers can't make money then they won't build new properties, so eventually causing less new supply.

Properties sector always like that i.e. searching for equilibrium point, properties price not high enough, then no new properties, eventually causing less supply. When demand > supply, the price goes up, then more and more developers start to build new properties eventually supply > demand, then price goes down and this cycle continue...

Don't treat reit as same as normal stocks, they ain't the same.

The only good news that can hope (in the coming budget) is the reduction in witholding tax of 15% for Malaysian, 20% for foreginers which is high compared to overseas counterpart. There won't be major upgrade in Reit stocks even for normal stocks because economy is heading for slowdown.

I bought Axreit because there will be around 7 cents distribution next month, so at 1.64 like buy at 1.59 only. Also, go in small amount only. As said, don't need to rush to buy one in this kind of market.

For normal stocks, I won't rush in too soon as I still can wait.

This post has been edited by cherroy: Jul 11 2008, 03:47 PM

Don't know purpose or not, but may be he/she wants to make it round figure as last done in term of lot is 9, so adding 1 to make it per K. 1 lots cost RM4 extra only (from 1.64 to 1.68).

Old timers like me, still buy/sell in per K shares, not use to x100. So most of the time, will make it x 1000 if not matched, easy to remember also. But this 1 lot is not from me.

Reit has some distinct difference compared to property stock, it basically owned the building itself, so if the reit portfolio is ABC bulding, XYZ factory, then as reit holders you are owning part of it.

Yup, that's why I opt for some reits lately because even in economy difficult time, as long as those property under the reit is having long term tenants especially from strong corporate company, then income is somehow secure and won't be affected by other factor as compared to normal property stocks. So yield is pretty known and highly predictable and secured. As long as those yield is 2x of normal FD rate, I am somehow ok with it.
As normal property stock, if others subsidiaries of company (especially those from building sector) are doing poorly, then it might drag the whole group in term of profitability wise. Another one issue is that under the reit, profit must be distributed which will be only good for minoirty shareholders like ours. Unlike normal property stocks, even if company make tons of profit, but they can decide to keep it in the company forever even in cash form without any investment, while only give tiny bit of dividend to the shareholders.

Reit is like buying a property and rent it out. While in normal property stocks, you are participating in the company as shareholder, so totally different risk.

But downside of reit, they have not much room for the upside because of profit wise is stagnant and grows relative slow (rental increment won't be fast, and rental amount only can be negotiable after the tenants renew their lease) even if economy is good time, unlike those common stock, price can shoot up 2x 3x in good time.

Yup, mostly reit listed currently is under some gearing especially when acquiring new properties. But with the SC rule of limitatin of 50%, it serves the ceiling they can go which is a good thing also. No doubt it would mean high interest expenditure but it won't be severe. Recent Reits sell-down might be because of this reason as well.

Also my view is even BNM increases the interest rate, it won't go too far, max I can see is 0.5% for near term only. The weakening economy might be a big concern for BNM to raise rate further even though inflation still pose a problem.

Those under right issue exercise (eg. Axreit with private placement of new shares at 1.68, if not mistaken few month ago) is a good way to finance the acquisition with incuring extra interest expenses.

This post has been edited by cherroy: Jul 18 2008, 11:34 AM

Yes, if total profit is not increased with the issued of new shares, then it will dilute the EPS. But those new funding or right issue is used for new acquisition of new properties which will generate more income to the company. So total profit should increase if the newly properties contribute positively to the company then might as well increase in EPS rather than decrease/diluted. So it depends how newly acquired properties perform, if profit generated from new properties is poor then dilution can occur.

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Added on July 21, 2008, 10:16 amAs retailers we look for the EPS as the EPS will determine how much company can give us.

This post has been edited by cherroy: Jul 21 2008, 10:16 AM

Market anticipated some 7.xx cents for half year, so annualised around 15 cents, at 1.63, gross yield is 9.2 or net yield 7.8%. That's the reason I bought at 1.64 last week.

With poorer economy outlook ahead and if indeed economy slow or near to recession, 95% of the stocks high probably will go down, reits won't spare from it. But yield you are getting is at once you bought.

Fyi, FD interest rate does affect reit price quite signficantly apart from properties outlook as the yield determine whether we choose FD or reit.

This post has been edited by cherroy: Jul 21 2008, 10:57 AM

Yes, you are right.

Howeverm, it should be performing as those newly acquired properties are existing factory like Nestle warehouse, hypermarket space for Giant which already has tenants or being leased out back.

Should be 50 x 100, but I am sure he is capable to take Rm81K in one shot as well.

Anyway, I wait until below 1.60 to make my next purchase, as I don't like the idea averaging down in a too tight range, as this will make bullets depleted too fast.
Also, with plenty of cheap sale around or may be fire-sale in near future or next few weeks or month, who knows. Don't need to rush.

Should be in this week or lastest this month end.

People will be lured to the distribution eventually form a temporarily support.

Gosh, with latest Q result, Atrium net yield is 9.5% currently.

If not the withholding tax, gross yield is 11.2%.

This post has been edited by cherroy: Jul 22 2008, 09:59 AM

Because of low liquidity, fund managers can't buy it. So there is no major support for the share price, it all depends on retailers (like you and me) willingness to buy only.
Also it properties portfolio only consist of 3 properties, the smallest in KLSE while all are in logicstics business which make it less diversified and a bit high risk than others. Especially logistics busines will be hurt by rising fuel price and economy slowdown.

With low liquidity, when there are substantial shareholders want to dispose, it can depress the price quite signficantly and lengthy, which we saw it happens everyday, sellers are eager to dispose.

Havign said that, 9.5% net yield is quite tempting, I still can buy to average down.

As long as you never sell with paper loss, as it still deliver good yield, then nothing much to worry. As if keep for aournd 7-10 years time, then basically all capital is recoup back.

This post has been edited by cherroy: Jul 22 2008, 10:30 AM

LOL, Atrium closed at 0.88, somebody purposely buy one lot at 0.88 after sellers finish their sale.

Take both lah if wish to, then no headache. haha.

In good time, Axreit will perform better than Atrium because of liquidity issue and more fund managers can chase after it. For liquidity issue, Axreit and Stareit is preferred.
But Atrium will have higher yield because of higher risk compared to Axreit, as Atrium's warehouse is tailored made for its tenants, so if tenants don't renew their lease then there are some expenses need to be spend to modify its warehouses.
http://www.atriumreit.com.my/
http://www.axis-reit.com.my/

It is about risk/reward ratio, higher risk high yield its offered. With net yield At 9.5% is very tempting, no doubt about it but Axreit isn't low either at around 7.9%. If gov decide to reduce the witholding tax which this industry has been lobbying since last year, but gov rejected, so this year only a remote chance only, then yield can be much higher. Gov needs to reduce the witholding tax in order to lure more people into it especially for foreigners now at 20% which is considerably high in regional standard especially compared with Singapore.

But downside currently for reit is potential high interest expenses on their loan due to potential higher interest rate.

Buy on your own risk, not mean to recommend any one of them.

Btw, I got both of it.

If I were you, I would add up on Axreit first as my style is always only average down if there is signficant gap between. Anyway just my preference only, doesn't necessary a right way to do.

But wait, those purchased price already being given previous distribution already or not, aka already take some distirubtion in the pocket already?

That's true, my advice is that spread the capital (that one would like to invest) across like say plan to buy over the next 1-2 year time. We might have long winter ahead, especially for Reits, increase in interest rate will hurt the attraction of Reits. My opinon, buying little by little is a better approach.

Another issue,
If reits are under price significantly below the market value or its NTA/NAV, it can be a good target for acquisition or privatisation actually. Just like reported in newspapar, Atrium is trading at 0.75 previously, while market value (NAV) for the properties is Rm1.00, that's mean who buy the 0.75 is buying at 25% discount compared to the market price. So if one take the whole company at 0.75 (I knew not possible, just theorectically), then sell it the properties to the open market, one will make 25% out of it.

It is as same on those normal stocks as well.

That's where privatisation can be a easy money making deal for those multi-millionaires, so rich become richer.

This post has been edited by cherroy: Jul 25 2008, 10:51 AM