BUKIT LANJAN: Malaysians! Keep up the pressure! Don’t rush to buy! Bring property developers down to their knees!

Funds with an objective of gaining inexpensive exposure to property in Malaysia can do so through Real Estate Investment Trusts or REITs. Not only that, such investments offer great liquidity and yields that are typically much more than conventional equity instruments. As at end-2015, Malaysian REITs had a market capitalisation of RM37.5 billion, a total asset value of RM45.7 billion and a net asset value of RM31.2 billion. This has grown from around a market value of RM310 million 10 years ago when REITs were first set up. A REIT is a fund or a trust which owns and manages income-producing commercial real estate (shopping complexes, hospitals, plantations, industrial properties, hotels, etc). A management company typically runs the REIT and pays a distribution to the REIT holders from its corporate taxable income … for more, go to http://www.capitalmarketsmalaysia.com/reits-offer-an-easy-liquid-exposure-to-malaysian-property/

BUKIT LANJAN: Malaysians! Keep up the pressure! Don’t rush to buy! Bring property developers down to their knees!

More bad news for property developers. CIMB Equities Research has maintained its Neutral stance on the real estate investment trust (REIT) sector, as it still lacks catalysts …

The key word is catalysts. Malaysians! Keep it lacking and property prices will fall like dominos when developers rush to sell their unoccupied space and units.

“This comes after the federal government revealed that the number of unsold completed residential units is up 40% to 20,807 units this year,” Gerakan Deputy Speaker Syed Abdul Razak Alsagoff said.

(Read this for context: https://bukitlanjan.blogspot.my/2017/11/bukit-lanjan-malaysians-hit-back-hard.html)

He said some argued that foreigners would fill the buyers’ void but that’s so “inaccurate”.

“Foreigners are restricted to the high-end properties. Developers nationwide cannot just depend on foreign buyers. It’s simply not commercially viable,” he added.

Syed Razak said CIMB Research acknowledged concerns on the oversupply of office and retail space but it opined that high-quality assets with continuous asset enhancement initiatives should be resilient.

“Well, Malaysians, let’s be resilient, step up the pressure by not buying and teach the property developers a lesson on resilience that they will never forget.

“Reduce the property prices or you rot,” he added.

5 Things I Learned About REITs in Malaysia (From a Bursa Malaysia-Sponsored Workshop)
On 15 April 2017, I attended a full-day REITs Analysis Workshop, part of the Bursa Investor Education Workshop Series where they talk about different investment vehicles and investment strategies. REITs stands for Real Estate Investment Trust. For other Bursa Malaysia-organised events, see here. It was presented by speaker Chua I-Min from ShareInvestCoach.com, a Singaporean financial planner specialising in fundamental analysis (I’ll explain this term too). I think the speaker did a great job in breaking down all the jargon into digestible information. All-in-all, I learned loads. Here are 5 things I learned about REITs in Malaysia, because sharing is caring … for more, go to https://ringgitohringgit.com/reits-in-malaysia-bursa-malaysia/

Syed Razak, who is Gerakan’s nominee to contest N.37 Bukit Lanjan in the coming 14th General Election (GE14), urged Malaysians to continue to refrain buying until property developers bring down their prices to reasonable levels.

“Buy only properties that are reasonably priced. Malaysians! Victory against property developers is within your grasp or sight if you remain resilient and avoid all over-priced properties.

“There is no reason to buy a second or third property for investment at such trying economic times. You buy high now, you suffer,” he added.

Here’s what The Star Online posted:

"CIMB Research retains Neutral on REIT sector, lacks catalysts

Tuesday, 14 Nov 2017
8:31 AM MYT

KUALA LUMPUR: CIMB Equities Research is maintaining its Neutral stance on the real estate investment trust (REIT) sector, as it still lacks catalysts, while downsides are largely priced in.

It said on Tuesday its call is supported by average CY17-18F dividend yields of 5.2-5.4%, at a discount to the three-year historical average dividend yields of c.6.5%.

“While the oversupply of office and retail space are still concerns, we think high-quality assets with continuous asset enhancement initiatives should be resilient in CY17F,” it said.

CIMB Research recently organised a REIT expert speaker session as part of CIMB’s Luncheon Series featuring property veteran Datuk Stewart LaBrooy, executive chairman of AREA Management Sdn Bhd.

“LaBrooy is of the view that the Malaysian REIT (M-REIT) sector is at the overbuilding and downturn phase of the REIT cycle, where owners are cashing in on high profits, resulting in overbuilding, rising vacancies and declining rent.

“The rising 10-year Malaysian government securities (MGS) yields do not bode well for M-REITs as the premium of dividends over the MGS has narrowed significantly,” it said.

The research house said LaBrooy advocates investors focus on M-REITs that offer visible growth and have clear accretive acquisition pipelines.

He is of the view that the incoming retail supply has put pressure on retail assets and believes e-commerce is a looming threat.

However, he thinks the market will continue to favour strategically-located prime malls (Suria KLCC, MidValley and Sunway Pyramid Mall), which have relatively stronger power to increase rental. He believes retail REITs should look into amalgamating retail and e-commerce.

The industrial segment is the biggest beneficiary of the e-commerce boom and M-REIT players should tap into this segment, LaBrooy said.

“He is of the view that this segment has a strong growth story through acquisitions, as well as organic growth, given the tight industrial space supply. The rapid growth of e-commerce, especially in APAC, is creating new high-value assets that are now coming on stream, he said.

“LaBrooy expressed his concern over the fast-growing office floor space, which has led to rental rates pressure, especially in the Klang Valley.

CIMB Research quoted him as saying a slowdown in the business expansion could further soften demand.

But office assets with good connectivity to malls and transport hubs should still prosper and office REITs should look into diversifying their portfolios to include high-end offices, not only in Malaysia but abroad.

What used to be the darling segment of the sector several years back is now in a much less favourable light given the oversupply of retail malls and looming threat of e-commerce.

Marc Woo, Google’s Malaysia head of e-commerce, travel and financial services was recently quoted by the Bangkok Post as saying that Southeast Asia will be the next major boom market for e-commerce in Asia Pacific (APAC).

Notably, the APAC e-commerce industry expanded a commendable 25% on-year in 2015.

Savills Research shows that retail space has reached 8 sq ft per capita in Klang Valley, while in some areas like Petaling Jaya, it is more than 16 sq ft per capita.

In 2016, the Greater KL area had a cumulative retail supply of c.60.2m sq ft and it is estimated that by 2019, this will grow to c.73m sq ft.

“To tackle the challenges faced by the retail REITs, malls are shifting towards providing more lifestyle and F&B offerings, as opposed to just brick and mortar.

“LaBrooy believes that retail REITs should set an e-commerce strategy in place. One possible way, he shares, is to amalgamate e-commerce with retail, i.e. using stores not only as a showroom or a retail centre but also as a mini distribution centre.

“He also believes that retail REITs should look into acquiring distribution and logistics centres as this could create an end-to-end value chain for the consumers, all the way down to delivery,” CIMB Research said.

He, however, continues to see the larger and integrated malls in Malaysia outperforming their smaller, standalone counterparts.

LaBrooy believes that demand for new high-quality industrial assets will transform the segment, which has led to several new mega distribution centres which carry high price tags as retailers start turning to logistics.

Notably, UK-based retailer Marks and Spencer is building a 900,000 sq ft distribution centre with one m products processing capability per day and will consolidate its 110 warehouses into just four.

Thus, LaBrooy believes there is a strong growth story through acquisitions and organic growth in the industrial segment, which will also be further propelled by the growth of the e-commerce segment.



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