Revisiting my REIT Investment Portfolio for 2H 2012

(Last Updated On: 26/01/2014)

Investing in REIT is something I am fond of. I am no investment banker, so I like REIT for its relatively simple business model and low volatility with consistent dividend income.

Ahh, I can sleep better at night with these in mind đŸ™‚ .

From macro perspective, M-REIT stock prices are now all-time-high. Value investor could still enter long positions now, but bear in mind that yield (percentage of investment return) will be a tad bit low compared if you were to buy them 6 months ago. Analysts like to use the jargon – “compression of yield” to describe this scenario. Well, I say, I am no analyst so I’ll just present the facts and figures in layman forms.

REIT Yield 2H 2012

As we transcend into 2H 2012, I did a review of two major holdings I held since end of last year – Pavilion REIT and Capital Malls Malaysia Trust. A brief sanity check if things are doing well, by reading some analysts’ reports on the going-ons behind these REITs.

From micro perspective, specifically the REIT counters you are already holding and wishes to own soon – it’s prudent to do a health check on what’s happening behind the scenes. It’s also called due dilligence.

Things like – is the REIT acquiring new assets for growth? Is there any tenancy issues which may affect its rental income? Is it borrowing more to acquire new properties or to repay its debt obligation? Any rights issue announcement?

By the way, checking the REIT stock price everyday is NOT due diligence.

If you are invested in as well, I think you would find these compilation of info useful.

Pavilion REIT90 over percent asset is Pavilion Shopping Mall – a prime retail mall. Holds the reputation largest retail REIT in Malaysia based on total asset value

  1. Recently completed walkway bridge connecting KLCC Convention Centre and Pavilion Mall attracts 17k-20k shoppers daily.
  2. Upcoming MRT in Jalan Bukit Bintang will increase footfall as well – making the mall more accessible
  3. Fashion Avenue wing is on track to complete in September with 100 percent committed occupancy. Expected 67% Return of Investment – which will translate to higher dividend distribution for unitholders
  4. Two-thirds of total tenancy agreement expires in 2013, making room for renewal negotiations. Rental Renewal exercise will expect 12-15 percent hike in rental rate – which again, will translate to higher dividend for unitholders.
  5. Plan still intact to acquire Fahrenheit 88 and USJ  ‘da:men’ mall in 2014 and 2015 respectively.
  6. Pavilion Extension construction expected to complete in 2016 – more lettable area is equal to more rental income!
  7. Rental per square feet (psf) still has a lot of room to go at current RM 17 (2012) and RM 19 (2013) psf, benchmarked against Suria KLCC at RM 25 psf.

Capital Malls Malaysia Trust – holds 4 iconic shopping malls throughout Malaysia. Second largest retail REIT in Malaysia based on total asset value

Reputable as it has strong parentage (Capital Malls Asia) with good sound track record. Capital Malls Asia has extensive network managing malls in India, China, Japan and Singapore – and brings to the table key knowledge and understanding of tenants’ needs.

  1. Proposed plan to convert car par lots at East Coast Mall, Kuantan into retail space – increase of 23 percent of lettable area. [See a trend of these value added initiatives here? It was the same with Gurney Plaza Penang]
  2. Upcoming MRT in Jalan Bukit Bintang would also benefit Sungai Wang Plaza – making it more accessible and in turn, boost footfall to a higher rate.
  3. Portfolio occupancy at all its retail assets remains near to 100 percent.

Trivia – on shopping malls in Penang

Industry sources mentioned that NO NEW Malls can be built in Penang to curb excess supply. This move is beneficial to Gurney Plaza and Queensbay Mall as limited pool of malls would entail CMMT to higher rental rates.

Source: Am Investment Research

Disclosure: Long in PAVREIT and CMMT REIT

REIT holdings cmmt pavreit 2012

KCLau wrote a comprehensive article on how to invest in REIT – you could write about it here.

Alternatively, you could visit REITMethod.com to check out an even more comprehensive online course on REIT investing, the first of its kind in Malaysia.

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