Sunday, October 24, 2010

REITs In Malaysia

REITs - Be a hassle-free "landlord"

Want to buy a physical retail lot to collect a steady stream of rental income but don't have enough money? You could try investing in real estate investment trust (REITs), which are formed by companies that purchase and manage real estate using funds pooled from shareholders. Dividend payouts can be generous and you get exposure to a diverse portfolio of commercial properties.

"Typically, M-REITs pay a yield of 8% to 11% per annum."

"The dividends I get from investing in REITs and the returns I get from investing my own property are the same, but 10% less for the REIT dividend because of tax. Assuming your yield from REITs is 7.5%. Once you take away the 10% withholding tax, which is 90% of 7.5%, you will still get 6.75%. That's a very good return."

"If you're looking at purely dividend returns, and let's say you're a new retiree who has RM100K from your EPF account, my answer is that only a REIT can give you a return in excess of 6% over a long period, and many give capital appreciation over time."

"Unlike Stocks, REITs usually state upfront that all or a high percentage of profits would be fully distributed in the form of dividends. Thus their main advantage over stocks is their predictable, dependable and frequent income distribution."

"M-REITs are deemed more defensive than certain bonds due to the nature of securities themselves. Bonds are really a debt instrument issued by the borrower company, whose level of risk or default and thus, return, is reflected by an independent rating agency. Bonds return are relatively low and static compared with REITs"

"If the assets are in a good location with well management, their capital value will increase over time. Even the buildings are old, the land value will increase. At some point, the cost of land may be higher than the value of property."


1. M-REITS will be subjected to equity market risks. Their price movement are more vlatile, unlike actual properties, where value is determined by recent comparative transactions, and subject to 'willing buyer, willing seller'

2. Entry price levels are also factors, that can be used to minimize capital losses, which are a real threat in bearish market. As a proxy to property market, one can also buy REITs in the same manner as properties, such as when the prices of actual properties are low.

To end this, there is upsides & downsides about REITs investment. This can be optimized to more upsides if we could do some research and invest into REIT that will give best returns & appreciation. The returns of REITs have been around 7%, while FDs' have been around 4%.

REITs Picks
1. Axis REIT (RM2.12) - has an active pipeline of acquisitions and dispositions. This enables the REIT to have active yield management to lock in profits on capital appreciation, thereby enhancing overall yield in the long term.

2. CapitalMalls Malaysia Trust (CMMT) - owing to its good record in Singapore. It has the ability to raise values and rentals, as well as to maintain the yields over a long period. The investor is almost guaranteed a return that is in tune with the value of their current assets. CapitaMalls Asia has successfully re-branded Mines Shopping Fair, which is one of the three properties injected into its REITs. The pedigree of the most successful REIT in Asia with strong competence, expertise and ability to capitalize on the holding company's inherent strength.

3. Sunway REIT (SunREIT) (RM0.99)- IPO price (RM0.90)(8 July 2010) the largest REIT in Malaysia, because it owns asset with proven track record. These assets are located in award-winning townships. Given that the properties are located in a planned township, SunREIT properties do not facebthe risk of crowding or immediate competition from similar properties being developed next door. SunREIT is the largest elephant in the room.

4. UOA REIT (RM1.49)- It's got a steady stream of projects that it can feed into REIT. It's run by creative people, who are also developer and the REIT manager.

Monday, March 8, 2010

Maybank Research (March 2010)

01/03 Sime Darby RM8.45 Hold TP9.20
01/03 Maxis RM5.52 Hold TP5.80
01/03 Genting RM6.31 Buy
01/03 Genting Malaysia RM2.72 Sell
01/03 RHB RM5.82 Buy TP6.40
01/03 Nestle RM33.90 Hold
01/03 IJM Corp RM4.43 Hold TP4.50
01/03 Lafarge RM6.30 Buy TP7.40
01/03 Air Asia RM1.44 Hold TP1.35
01/03 KNM RM0.805 Buy
01/03 KLCC Property RM3.27 Buy TP3.60
01/03 Bintulu Port Holdings RM6.30 Hold TP6.30
01/03 Media Prima RM1.83 TP2.08
01/03 Ann Joo Resources RM2.80 Hold TP2.60
01/03 Sunway City RM3.30 Buy TP4.80
01/03 Kinsteel RM0.995 Hold TP1.03
01/03 Alam Maritim Resources RM1.77 Buy TP2.40
01/03 Hock Seng Lee RM1.27 Buy TP1.75
01/03 Petra Perdana RM1.35 Hold TP1.45
01/03 CB Industrial Product Holding RM2.70 Buy TP4.40

02/03 WCT RM2.64 Buy TP3.40 top pick in construction
02/03 MISC RM7.80 Buy TP9.05

04/03 Berjaya Toto RM4.33 Sell

08/03 Kossan Rubber Industries RM7.38 Buy TP10.20

09/03 Maxis RM5.44 Buy TP6.20

10/03 Gamuda RM2.79 Buy TP3.80
10/03 Glomac RM1.29 Buy TP1.78

11/03 Gamuda RM2.79 Buy TP3.80
11/03 George Kent (Malaysia) RM0.93

12/03 Berjaya Sports Toto RM4.41 Sell
12/03 Tan Chong Motor Holdings RM3.31 Buy

15/03 AirAsia RM1.33 Sell TP1.15
15/03 Top Glove RM12.26 Buy TP14.50 (dividend payout 40% from net profits)

16/03 Berjaya Toto RM4.37 Sell
16/03 Tanjung Offshore 1.05 Buy
16/03 EON capital RM6.09 Hold

17/03 Tenaga Buy

18/03 Top Glove Corporation RM12.56 Buy TP14.50

19/03 SP Setia RM4,15 Hold TP4.00
19/03 EON Capital RM6.90 Hold TP7.20

22/03 KNM RM0.785 Hold TP0.75 (15-27% earnings cut for 2010-11) Bidding oarty's due diligence has a 22 March deadline (0.90/sh), eventually drawing experience from the kitchen sinking excersise in 4Q09, which largely mirrors Sime Draby-Ranunia's price revision of the fabrication yard sale deal.

23/03 Hock Seng Lee RM1.34 Buy TP1.75 (HSL)
24/03 Glomac RM1.28 Buy TP1.78 - still in land aquisition mode
25/03 Tanjung Plc RM17.74 Buy TP19.10 - Dividends & growth potential
25/03 Sapura Crest Petroleum RM2.36 - Regional growth ahead
25/03 Gamuda RM2.79 TP3.80 - Taking the lead on water consolidation RM10.75b
26/03 Gamuda RM2.84 Buy
26/03 Loh & Loh RM4.80 Buy TP6.00 - A major win (Hulu Terengganu hydroelectric project)
29/03 TM RM3.43 Buy TP3.86

Monday, February 22, 2010

25 Stocks for 2010

25 M'sian stocks that are expected to outperform the FBM KLCI

Standard & Poor’s recently issued a comprehensive report on Malaysia and the 25 top stocks it was looking to outperform the market in the Year of the Tiger. Below is an excerpt of that report.

We maintain FBM KLCI target at 1,400 points in 2010 for an 11% return, pricing the index at 16 times market consensus earnings for this year.

Based on valuation grounds and growth prospects, we are “overweight” on the banking and healthcare sectors in Malaysia. We are “underweight” on the telecoms sector.

1. Genting Bhd

We like Genting for its wide experience in the casino business, expanding footprint and financial strength.

It offers exposure to the integrated resort in Singapore, which will be a significant contributor to earnings over the medium term, while domestic casino operation will provide relatively stable earnings.

The management continues to seek casino opportunities elsewhere to expand its footprint further.

Valuations are not demanding at current level with the stock trading at a discount of about 20% to its sum-of-parts value.

11. CIMB Group

CIMB Group is our pick of the Malaysian banks for relative and absolute outperformance this year.

Our 2010 net profit forecast suggest earnings growth of 24.3%, which comfortably beats the average sector growth of 19.9%.

CIMB remains attractive for its established consumer banking business, strong investment banking franchise and dynamic management. It also has the most developed and best resolved regional banking strategy.

12. SP Setia Bhd

We like SP Setia for its good track record in generating sales even in difficult times, and its ability to enhance the value of its landbank through innovative products.

Its landed residential projects are strategically located in three major states in Malaysia – Penang, Johor and Selangor – as well as in Vietnam.

In addition, it will soon diversify and enlarge its earnings base to include commercial development with the launch of its mega RM6bil Kuala Lumpur EcoCity along Jalan Bangsar in October.

21. Malaysia Steel Works (KL) Bhd (Masteel)

After a difficult 2009, we expect the local steel sector to benefit from increasing domestic project implementation this year and a rising average selling price.

Masteel remains one of the cheapest steel stocks, with an estimated 2010 PER below six times against peer average of 8.5 times.

24. Axiata Group

We like Axiata for its vast geographical reach in Asia’s fast-growing mobile markets and good earnings growth potential.

Its group-wide ongoing reform, which includes its cost-down initiatives and emphasis on profitability, are nicely panning out and should help support earnings growth, moving forward.

At the current price, the stock is trading at 2010 and 2011 PERs of 13.2 times and 12.2 times respectively. Valuations are attractive, in our opinion, particularly given Axiata’s growth potential and improved balance sheet.

25. Tenaga Nasional Bhd (TNB)

TNB’s earnings visibility has improved, with coal cost expected at US$85 a tonne in the financial year 2010 as 45% of requirements have been locked in at US$65-US$70 a tonne.

Meanwhile, electricity demand is recovering at a faster rate and is expected to exceed 3% year-on-year, driven by the pick-up in the industrial sector.

Foreign shareholding seems to have stabilised at 9.4% in November and December 2009 from the peak of 28.3% in April 2007.

Valuation is undemanding as compared to its peers and its historical trend.

Tuesday, February 9, 2010

Maybank Research Stock Picks

Equity Research (Stock Picks)
Large Cap
TENAGA 7.98 TP12.10
GAMUDA 2.77 TP3.80
KNM 0.74 TP1.02
F&N 11.00 TP13.25

Mid Cap
HSL 1.16 TP1.40
GLOMAC 1.35 TP1.78
SUNCITY 3.20 TP4.20

JAN 2010
KNM 0.80 BUY TP1.02
MAXIS 5.33 HOLD TP5.80
PLUS 3.30 BUY TP4.20

FEB 2010
Lafarge 6.30 BUY TP7.40
Petra Perdana RM1.42 Sell
EON Capital RM7.06 Hold
DIGI Com RM22.10 Sell
Bursa Malaysia RM7.71 Sell
EON Capital RM6.85 Hold
- HLB merger back on the table again?
- An offer for the underlying business “Privatizing” at RM0.90/share.
Petra Perdana RM1.45 Hold
- A new Board, a new beginning
Star Publication RM3.28 Hold
AMMB holdings rm4.61 Buy
WCT RM2.62 Buy OSK buy TP3.30
Fraser & Neave Holdings RM10.56 Buy TP13.25
Mah Sing Group RM1.80 Buy TP2.56
Kinsteel Hold TP1.03 (downgrade) Steel Industry: Neutral
Ann Joo Hold TP2.60 (maintain)
Maybank RM6.70: Not Rated OSK Buy TP7.05 MIDF Neutral
F&N 10.50 Buy TP13.25
GAB RM6.60 Hold
Dialog Group RM1.34 Hold OSK buy TP1.52
11/02 IOI Corporation RM5.20 Sell TP4.70
11/02 RCE Capital RM0.675 Buy TP0.975
11/02 Notion VTEC RM2.79 Buy TP4.20 (up-scale 53%)
11/02 AmanahRaya REIT RM0.835 Buy TP1.14
11/02 IJM Corporation RM4.40 Hold
11/02 Air Asia RM1.38 Hold TP1.35
11/02 CB INdustrial Product Holding RM2.62 Buy TP4.40
12/02 Berjaya Toto RM4.27 Sell
12/02 BAT RM42.10 Hold TP43.00
12/02 Star Publications RM3.20 Hold TP3.37
12/02 MBM Resources 2.55 Buy TP3.20
17/02 LITRAK RM2.89 Buy TP3.55 potential 22% ipside DY5.5%
18/02 Mah Sing Group (MSGB) RM1.80 Buy TP2.56
19/02 Loh & Loh Corporation RM4.98 Buy TP5.35
19/02 DIGI RM22.48 Hold (from Sell) TP23.30
19/02 Petronas GAs RM9.78 Sell TP8.80
22/02 Genting Bhd RM6.36 Buy
22/02 Proton RM3.98 Buy
22/02 EON Capital RM6.90 Hold
23/02 TM RM3.35 Hold (from Buy)
23/02 Tan Chong Motor Holdings (TCM) RM3.05 Buy TP3.60
23/02 MSGB RM1.80 Buy TP2.60
23/02 QL Resources RM3.34 Buy TP3.68
23/02 TH Olantations RM1.49 Buy TP1.84
23/02 EPIC RM1.51 Buy TP1.95
24/03 CIMB RM12.66 Hold TP13.60
24/03 PLUS RM3.37 Buy with a decent net DPS5.6%
24/03 UMW RM6.18 Hold TP6.85
24/03 AEON RM4.98 Hold TP5.10
24/03 Wah Seong (WSC) RM2.32 Buy TP2.80 O&G
24/03 JTI RM5.09 Buy Tp5.60 (from 5.30)
24/03 Tanjung Offshore RM1.07 Buy TP1.45
25/03 MISC RM7.95 Buy TP9.05
25/03 Axiata RM3.50 Hold TP3.60
25/03 KLK RM16.68 Hold TP15.00
25/03 Genting Plantations RM6.18 Hold TP6.10
25/03 MAH RM4.95 Hold TP under review
25/03 WCT RM2.65 Buy TP3.40
25/03 KFC RM7.94 Hold TP under review
25/03 Carlsberg RM4.56 Hold TP4.60
25/03 Sunway Holdings RM1.40 Buy Tp2.10
25/03 Loh & Loh RM4.60 Buy TP5.80
25/03 Shell RM10.70 Ceasing Coverage

KENCANA 1.42 TP2.00

Friday, January 1, 2010

GAMUDA - Start of rising earnings trend

Start of rising earnings trend; new warrants to “reward” shareholders Earnings improved, warrants enticing. Gamuda’s 1QFY10 net profit was within our expectation as property sales and construction margins improved. A surprise 6sen interim DPS (+50% YoY) was declared, leading us to raise full-year DPS forecast to 12sen from 8sen. A new 1-for-8 5-year warrants to raise RM742m (maximum) is offered at just 10sen each (exercise price not fixed yet), which will provide longer term funding, particularly for its Vietnam property ventures. Buy.

1QFY10 results in line. 1Q’s healthy RM63m net profit (+14.5% YoY, +45.6% QoQ) was within our expectation (22% of our FY10 forecast), but appeared to be below the market’s, at 19% of full-year consensus earnings. Improved property sales of RM250m in 1Q10 (+210% YoY) and better construction margins aided YoY pretax profit growth, aside from continued sturdy contribution from its water concessions (see segmental breakdown for details). Net gearing improved significantly to just 0.09x (Jul 09: 0.12x), with net debt narrowing to RM278m (Jul 09: RM385m). Interim DPS of 6sen was higher than our 4sen projection.

Proposes 1-for-8 renounceable warrants. This involves a maximum 267.7m warrants which will be issued at 10sen each. The issuance will raise RM26.8m gross proceeds initially and up to RM714.8m over a 5-year period to fund Gamuda’s long-term plans, particularly its Vietnam property development projects. The warrants’ exercise price has yet to be determined, but an indicative is RM2.67 based on Gamuda’s last 5-day weighted average share price. We estimate a net 4% EPS dilution. At an issue price of just 10sen, the proposed warrants serve to entice shareholders to ride on the long-term upside potential of Gamuda.

Maintain Buy. We expect a more active rollout of major government infrastructure jobs in 2010. Prospects for Gamuda are improving on more manageable building material costs and a healthier property demand outlook. The group continues to vie for Middle East projects in Qatar, Bahrain and Oman worth a total RM4b. We retain our forecasts, expecting an improving QoQ earnings trend. Our forecasts imply a strong 45% rebound in FY10 profits. Our RNAV-based TP is RM3.80.