Sunday, 30 October 2011
CapitaMalls M'sia Trust - Kenanga Research (29 September 2011)
CMMT is also picked as the top choice as undervalued defensive play in volatile environment.
Reasons why CMMT becomes the top pick for Kenanga Research:
1) largest 'pure play' M-REIT
2) sizable market capitalization of Rm2.0b enables better fund raising opportunities for asset injection.
3) strong branding and parentage via the CapitaMalls Asia which provides good asset injection avenue
4) landmark quality assets
5) portfolio average property yield of 6.8% is similar to current market cap rates of 6%-7%, which could provide a wider range of asset injection oportunities.
Th Greater Fool Theory in Real Estate Investment
We have seen that the property prices have been moving upward quite significantly over the pass few years. This movement is not supported by the increase in the household income level. Therefore, without the support of this fundamental, how is it possible that the property prices keep on maintaining its upward trend?
One of the possible reason for this is due to the 'Greater Fool Theory'. have you ever heard of the greater fool theory? and how does this theory relates to property investment?
Here's how it works, assuming that I am a fool and I buy a property at a high price. Supposedly, the property price for my property is RM500,000. I am willing to pay such a high price because of the thinking that I will be able to sell it at a higher price. Then, another fool, a greater fool, come and buy the property from me at a price of RM600,000 with the same mind set that the property can be sold at an even higher price thus will be able to make a profit as well. Therefore, it is okay for him to pay the high price. Then another person, an even greater fool, comes in and buy the property at an even higher price and the process continues on over and over again.
Every single participant in the process has the mindset of buying high and hope to sell higher. However, this process will eventually comes to an end and the one who will be getting burn is the last person who holds the property as he will not be able to sell the property without having to incur a substantial loss.
Property prices can't keep on going upward. Eventually the bubble will burst and this was what we saw during the subprime mortgage crisis. Therefore be caution of the high property prices that you can see nowadays as this may not be supported by the real demand.
One of the possible reason for this is due to the 'Greater Fool Theory'. have you ever heard of the greater fool theory? and how does this theory relates to property investment?
Here's how it works, assuming that I am a fool and I buy a property at a high price. Supposedly, the property price for my property is RM500,000. I am willing to pay such a high price because of the thinking that I will be able to sell it at a higher price. Then, another fool, a greater fool, come and buy the property from me at a price of RM600,000 with the same mind set that the property can be sold at an even higher price thus will be able to make a profit as well. Therefore, it is okay for him to pay the high price. Then another person, an even greater fool, comes in and buy the property at an even higher price and the process continues on over and over again.
Every single participant in the process has the mindset of buying high and hope to sell higher. However, this process will eventually comes to an end and the one who will be getting burn is the last person who holds the property as he will not be able to sell the property without having to incur a substantial loss.
Property prices can't keep on going upward. Eventually the bubble will burst and this was what we saw during the subprime mortgage crisis. Therefore be caution of the high property prices that you can see nowadays as this may not be supported by the real demand.
The Connection in Pavilion KL
If you have been to Pavilion KL, you will not fail to notice that there is one interesting part of the shopping mall that is not commonly found in other shopping malls.
This interesting part is called 'The Connection'. The connection as its name implies is a long stretch of open-air path that cuts through the shopping mall, linking the two edges of the shopping mall with the main function of providing easy access for the crowds to walk through the shopping mall easily without 'entering' the shopping mall. Pretty much like the path in Junction 8 Singapore where the pedestrian can walk from the Bishan MRT station to the Bishan Bus Interchange directly.
In my point of view, this path is a good idea for the mall to generate rental income, in which F&B outlets and restaurants are usually placed along the stretch providing alfresco dining for the diners. One key advantages of having an alfresco space is that it can remains open regardless of the opening hour of the shopping mall.
In Pavilion, 'the connection' is open for business until 3am. This means longer business hours and more money for the retail operator. I wonder how much rate is the shopping mall charging the tenants.
This interesting part is called 'The Connection'. The connection as its name implies is a long stretch of open-air path that cuts through the shopping mall, linking the two edges of the shopping mall with the main function of providing easy access for the crowds to walk through the shopping mall easily without 'entering' the shopping mall. Pretty much like the path in Junction 8 Singapore where the pedestrian can walk from the Bishan MRT station to the Bishan Bus Interchange directly.
In my point of view, this path is a good idea for the mall to generate rental income, in which F&B outlets and restaurants are usually placed along the stretch providing alfresco dining for the diners. One key advantages of having an alfresco space is that it can remains open regardless of the opening hour of the shopping mall.
In Pavilion, 'the connection' is open for business until 3am. This means longer business hours and more money for the retail operator. I wonder how much rate is the shopping mall charging the tenants.
Real Estate Investment Trust (REIT)
The definition of REIT or Real Estate Investment Trust as given by the investopedia is:
"A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax consideration and typically offer investors high yields, as well as a highly liquid method of investing in real estate."
There are three types of REITs,
1) Equity REITs: REITs that invest in and own properties. Its major source of income is from the rental that are paid by the tenants every month.
2) Mortgage REITs: REITs that own property mortgages. These REITs loan money to property buyers and the revenues are generated through the interest that they charged on the mortgage loans.
3) Hybrid REITs: REITs that are the combination of the equity REITs and mortgage REITs.
The first REIT in Malaysia is the Axis REIT which was listed on the 3rd August 2005 with the investment portfolio comprise primarily commercial, office and office/industrial real estate. Up until today, there are 13 REITs in Malaysia. Some of the largest REITs are Sunway REIT, CapitaMalls Malaysia Trust and Axis REIT.
REIT can be bought through the stock exchange and the return that the investors will receive are from the capital appreciation and also the dividend that are paid out usually on a semi annual basis. In Malaysia, REITs are required to pay out at least 90% of their taxable profit in dividends.
As REITs holds rental producing properties, we can expect that the dividends pay out by REITs to be consistent over the years. This is good for investors that are looking at a way to 'park' their money in a safe and secure investments and yet enjoy a stable and regular income stream over the long term.
Property Kopitiam Open for Business
Hi and welcome to the website.
I have created this website from the desk of my office in the middle of the Sunday afternoon. Yes, if you are feeling that something doesn't seems right with the statement just now then you are right. It is Sunday (weekend) and I am here in the office. Wow!! Does it mean that I am extremely hardworking? Well, I am sorry to say that I am not, if I am hardworking, I wouldn't of create this website right from my office. Isn't that right? :-)
I am here simply because there is nothing else worthwhile to do back at home. I can't focus on doing something productive when the bed is sitting right beside me. This is because I would often end up taking a nap instead and the whole will be gone.
In addition to that, I am also here to do some catching-up with my work. You see, I am not that productive as compared to many of my colleagues as they are many years more experienced than me. I have just started out working for this company about 4 months ago and being a newbie, there are plenty of things that I need to learn especially when the company that I am working for is one of the largest real estate company in Malaysia.
The main reason for me to create this website is because, I believe that it is easier to remember what I have learnt if I were to share them to someone else.I would also like to hear some feedbacks from the reader on the materials that I will be posting. Therefore, it would be a win-win situation, the readers can know more about the property and I can get some valuable opinions with regards to property investing.
I hope that you can take some of your time to explore this website and post your comments on the articles that I have written. I will be posting as many articles as possible about the property market and REITs in Malaysia and Singapore. I hope that you find that the material interesting and will add value into your understanding of property investing. Thanks.
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