Tower Reit - Return on Retained Earnings

Tower Reit
Year		DPS		EPS		Retained EPS
2002
2003
2004
2005
2006		0		7.5	a	7.5
2007		9.3		8.5		-0.8
2008		9.5		9.9		0.4
2009		9.4		10.7		1.3
2010		9.5		10.6		1.1
2011		10.7		11.9	b	1.2
2012
Total		48.4	c	59.1	d	10.7	e
From	2006	to	2011
EPS increase (sen)			b-a	4.4
DPO			c/d	82%
Return on retained earnings			(b-a)/e	41%
(All figures are in sens)

Starhill Reit - Return on Retained Earnings

Starhill Reit
Year		DPS		EPS		Retained EPS
2002
2003
2004
2005
2006		2.5		5.6a		3.1
2007		6.7		6.9		0.2
2008		6.9		6.9		0
2009		6.9		6.9		0
2010		6.5		6		-0.5
2011		6.5		4.9	b	-1.6
2012
Total		36	c	37.2	d	1.2	e
From	2006	to	2011
EPS increase (sen)			b-a	-0.7
DPO			c/d	97%
Return on retained earnings			(b-a)/e	-58%
(All figures are in sens)

Axis Reit - Return on Retained Earnings

Axis Reit
Year		DPS		EPS		Retained EPS
2002
2003
2004
2005		0		13		13
2006		10.9		12.8		1.9
2007		12.9		13.6	a	0.7
2008		14.9		15.2		0.3
2009		17.9		14		-3.9
2010		14.7		14		-0.7
2011		19		14.4	b (P)	-4.6
2012
Total		90.3	c	97	d	6.7
From	2005	to	2011
EPS increase (sen)			b-a	1.4
DPO			c/d	93%
Return on retained earnings			(b-a)/e	21%
(All figures are in sens)

Boustead Reit - Return on Retained Earnings

Boustead Reit
Year		DPS		EPS		Retained EPS
2002
2003
2004
2005
2006
2007		3.7		10.6	a	6.9
2008		10.9		11		0.1
2009		11		11.2		0.2
2010		9.4		12		2.6
2011		10.2		13.7	b (E)	3.5
2012
Total		45.2	c	58.5	d	13.3
From	2007	to	2011
EPS increase (sen)			b-a	3.1
DPO			c/d	77%
Return on retained earnings			(b-a)/e	23%
(All figures are in sens)

AL-'AQAR Healthcare Reit - Return on Retained Earnings

AL-'AQAR Healthcare Reit
Year		DPS		EPS		Retained EPS
2002
2003
2004
2005
2006		0		7.3	a	7.3
2007		6.4		7.5		1.1
2008		7.7		7.4		-0.3
2009		8.4		7.1		-1.3
2010		8.2		7.3		-0.9
2011		8.5		7.3	b (E)	-1.2
2012
Total		39.2	c	43.9	d	4.7
From	2006	to	2011
EPS increase (sen)			b-a	0.0
DPO			c/d	89%
Return on retained earnings			(b-a)/e	0%
(All figures are in sens)

Pavilion REIT's earnings forecast raised

2012/08/07

KUALA LUMPUR: Maybank Kim Eng Research has raised the financial year 2012-2014 earnings forecast of Pavilion Real Estate Investment Trust (Pavilion REIT)by eight to 8.4 per cent.

It also factored in a higher rental growth and turnover rent as well as higher occupancy rate.

Maybank Kim Eng in a research note today said Pavilion REIT's first half net profit of RM95.6 million was above the research house and consensus expectations at 55 to 56 per cent.

"This was due mainly to higher-than-expected retail turnover rent and rental hikes," it said.

Going forward, it said piling works of the Pavilion KL Mall extension will commence in the third quarter, whilst construction of the sub-urban mall in Subang Jaya is ahead of schedule.

"As for the Fahrenheit 88 mall, the management is monitoring the leases due for renewal in the third quarter, rental reversions and tenancy profile.

"When acquired, we expect these properties to raise Pavilion REIT's asset size by more than 41 per cent from RM3.6 billion currently," it added.

Maybank Kim Eng has maintained a "hold" call on Pavilion REIT but revised upward the target price to RM1.40 from RM1.26 previously. -- BERNAMA

http://www.btimes.com.my/Current_News/BTIMES/articles/20120807114500/Article/index_html

Rights issues by REITs a tough sell?

Rights issues by REITs a tough sell?  
Written by Chua Sue-Ann     
Monday, 12 December 2011 11:26  

KUALA LUMPUR: It remains to see whether investors will warm up to recent proposals by Malaysian real estate investment trusts (REITs) to embark on rights issues for fundraising.

This comes as Hektar REIT and AmFirst REIT separately proposed rights issues in recent months. The former is doing so to fund new asset acquisition while the latter is seeking to reduce its bank borrowings. CapitaMalls Malaysia Trust (CMT)  also recently told The Edge Financial Daily that it is considering a rights issue to raise fresh capital.

Analysts and market observers said it is generally undesirable for REITs to embark on rights issues as investors expect dividends from REITs instead of having to plough in more capital.

“Effectively, they are asking investors to spend more on their stock in these uncertain market conditions,” said a property analyst.

However, judging from the price performance of both Hektar REIT and AmFirst REIT, investors have not reacted negatively to the news. This, surprisingly, is in contrast to investors’ harsh treatment of Singapore-listed REITs that embarked on rights issues.

According to analysts, the reason why Malaysian REITs are now turning to rights issues to raise funds, instead of the usual way of borrowing or unit placement, could be because their gearing is already near the 50% threshold (of total asset value) permitted for a REIT to borrow, or that the capital they seek to raise is larger than what can be achieved with a placement exercise.

In Hektar REIT’s case, its gearing ratio is 43.4%, just below the 50% limit, based on its total debt of RM347 million and total assets of RM799.47 million as at Sept 30. AmFirst’s REIT’s gearing as at Sept 30 was 39.8% based on total borrowings of RM419.6 million and total assets of RM1.053 billion.

On Dec 8, Hektar REIT proposed a renounceable rights issue to raise gross proceeds of about RM98.4 million. Proceeds from the rights issue will be used to partially fund the acquisition of two shopping malls in Kedah for RM181 million cash.

Hektar REIT added that it would also obtain bank borrowings of up to RM87.1 million to purchase the assets. Note that it held cash and cash equivalents of RM21.3 million as at Sept 30.

The REIT has yet to finalise the actual number of rights units and entitlement basis will be determined later based on the final issue price of the rights unit. 

Hektar REIT added that it will procure a written irrevocable undertaking from its substantial unitholders to fully subscribe for their entitlements, failing which underwriting arrangements would be made.

AmFirst REIT’s proposed rights issue, set on a three-for-five basis, is expected to raise gross proceeds of about RM218.8 million, based on an illustrative issue price of 85 sen per unit. The proceeds are to be used to pare down borrowings.
 
CapitalMalls Malaysia Trust, which also manages The Mines shopping mall, recently said it is also considering a rights issue to raise fresh capital. 

AmFirst said the rights unit issue price is expected to be fixed at a discount of no more than 20% to the theoretical ex-rights price of the unit. “The discount on the issue price of the rights unit is intended to reward unitholders for their continuous support of the fund,” AmFirst said.

Thus far, investors have not reacted negatively to the REITs proposal to conduct rights issues. The unit prices of both Hektar REIT and AmFirst REIT are still traded near their peaks.

“It could be because the unit prices are currently near historical highs, and more interestingly, at the current high prices they still offer rather good yields as well [Hektar REIT at 7.6% and AmFirst at 8.6% historical yield], so unitholders are happy,” said a market observer.

Other than that, he explained that there is still strong demand for REITS in times of market volatility, especially among institutional shareholders. 

“Pavilion REIT has gained 13.6% since last week’s IPO to RM1, and the yield is now only 5.7%. So, the management of REITs thought maybe a rights issue is a good idea,” he said.

The scenario is different in Singapore.

K-REIT Asia, a unit of the Keppel Land group, saw its unit priced plunge 9.7% to S$0.857 sen on Oct 18 after it announced plans to raise S$976.3 million (RM2.4 billion) through a 17-for-20 rights issue. Most of the funds raised by the REIT will be used to buy a 87.5% stake in Ocean Financial Centre (OFC) from its parent Keppel Land Ltd.

It was reported that investors didn’t like the pricing for the OFC deal, and the fact that it was a related party deal. It wasn’t entirely because K-REIT Asia had proposed to acquire it via rights issue funding.

“At the end of the day, REIT managements have to justify why they have to do a rights issue to ask for more money from the unitholders. While institutional shareholders are okay with a rights issue, it could be a turn-off for minority shareholders,” said a market observer.

How To Analyze Real Estate Investment Trusts

Posted: May 7, 2011

David Harper

Contact | Author Bio

ARTICLE HIGHLIGHTS

• A real estate investment trust is a real estate company that issues common shares.
• An REIT must agree to pay out at least 90% of its taxable profit in dividends.
• REITs are analyzed like stocks, but the depreciation of property is considered.

A real estate investment trust (REIT) is a real estate company that offers common shares to the public. In this way, an REIT stock is similar to any other stock that represents ownership in an operating business. But an REIT has two unique features: its primary business is managing groups of income-producing properties and it must distribute most of its profits as dividends. Here we take a look at REITs, their characteristics and how they are analyzed.

Tutorial: Exploring Real Estate Investments

The REIT Status

To qualify as an REIT with the IRS, a real estate company must agree to pay out at least 90% of its taxable profit in dividends (and fulfill additional but less important requirements). By having REIT status, a company avoids corporate income tax. A regular corporation makes a profit and pays taxes on its entire profit, and then decides how to allocate its after-tax profits between dividends and reinvestment; an REIT simply distributes all or almost all of its profits and gets to skip the taxation.

Types of REITs

Fewer than 10% of REITs fall into a special class called mortgage REITs. These REITs make loans secured by real estate, but they do not generally own or operate real estate. Mortgage REITs require special analysis. They are finance companies that use several hedging instruments to manage their interest rate exposure. We will not consider them here.

While a handful of hybrid REITs run both real estate operations and transact in mortgage loans, most REITs focus on the "hard asset" business of real estate operations. These are called equity REITs. When you read about REITs, you are usually reading about equity REITs. Equity REITs tend to specialize in owning certain building types such as apartments, regional malls, office buildings or lodging facilities. Some are diversified and some are specialized, meaning they defy classification - such as, for example, an REIT that owns golf courses. (For more insight, see 5 Types Of REITs and How To Invest In Them.)

Analyzing REITs

REITs are dividend-paying stocks that focus on real estate. If you seek income, you would consider them along with high-yield bond funds and dividend paying stocks. As dividend-paying stocks, REITs are analyzed much like other stocks. But there are some large differences due to the accounting treatment of property.

Let's illustrate with a simplified example. Suppose that an REIT buys a building for $1 million. Accounting requires that our REIT charge depreciation against the asset. Let's assume that we spread the depreciation over 20 years in a straight line. Each year we will deduct $50,000 in depreciation expense ($50,000 per year x 20 years = $1 million).

Let's look at the simplified balance sheet and income statement above. In year 10, our balance sheet carries the value of the building at $500,000 (a.k.a., the book value): the original historical cost of $1 million minus $500,000 accumulated depreciation (10 years x $50,000 per year). Our income statement deducts $190,000 of expenses from $200,000 in revenues, but $50,000 of the expense is a depreciation charge.

However, our REIT doesn't actually spend this money in year 10; depreciation is a non-cash charge. Therefore, we add back the depreciation charge to net income in order to produce funds from operations (FFO). The idea is that depreciation unfairly reduces our net incomebecause our building probably didn't lose half its value over the last 10 years. FFO fixes this presumed distortion by excluding the depreciation charge. (FFO includes a few other adjustments, too.)

We should note that FFO gets closer to cash flow than net income, but it does not capture cash flow. Mainly, notice in the example above that we never counted the $1 million spent to acquire the building (the capital expenditure). A more accurate analysis would incorporate capital expenditures. Counting capital expenditures gives a figure known as adjusted FFO, but there is no universal consensus regarding its calculation.

Our hypothetical balance sheet can help us understand the other common REIT metric, net asset value (NAV). In year 10, the book value of our building was only $500,000 because half of the original cost was depreciated. So, book value and related ratios like price-to-book - often dubious in regard to general equities analysis - are pretty much useless for REITs. NAV attempts to replace book value of property with a better estimate of market value.

Calculating NAV requires a somewhat subjective appraisal of the REIT's holdings. In the above example, we see the building generates $100,000 in operating income ($200,000 in revenues minus $100,000 in operating expenses). One method would be to capitalize the operating income based on a market rate. If we think the market's present cap rate for this type of building is 8%, then our estimate of the building's value becomes $1.25 million ($100,000 in operating income / 8% cap rate = $1,250,000). This market value estimate replaces the book value of the building. We then would deduct the mortgage debt (not shown) to get net asset value. Assets minus debt equals equity, where the 'net' in NAV means net of debt. The final step is to divide NAV into common shares to get NAV per share, which is an estimate ofintrinsic value. In theory, the quoted share price should not stray too far from the NAV per share.

Top Down Vs. Bottom Up

When picking stocks, you sometimes hear of top-down versus bottom-up analysis. Top-down starts with an economic perspective and bets on themes or sectors (for example, an aging demographic may favor drug companies). Bottom-up focuses on the fundamentals of specific companies. REIT stocks clearly require both top-down and bottom-up analysis.

From a top-down perspective, REITs can be affected by anything that impacts the supply of and demand for property. Population and job growth tend to be favorable for all REIT types. Interest rates are, in brief, a mixed bag. A rise in interest rates usually signifies an improving economy, which is good for REITs as people are spending and businesses are renting more space. Rising interest rates tend to be good for apartment REITs as people prefer to remain renters rather than purchase new homes. On the other hand, REITs can often take advantage of lower interest rates by reducing their interest expenses and thereby increasing their profitability.

Capital market conditions are also important, namely the institutional demand for REIT equities. In the short run, this demand can overwhelm fundamentals. For example, REIT stocks did quite well in 2001 and the first half of 2002 despite lackluster fundamentals, because money was flowing into the entire asset class.

At the individual REIT level, you want to see strong prospects for growth in revenue, such as rental income, related service income and FFO. You want to see if the REIT has a unique strategy for improving occupancy and raising its rents. REITs typically seek growth through acquisitions, and further aim to realize economies of scale by assimilating inefficiently run properties. Economies of scale would be realized by a reduction in operating expenses as a percentage of revenue. But acquisitions are a double-edged sword. If an REIT cannot improve occupancy rates and/or raise rents, it may be forced into ill-considered acquisitions in order to fuel growth.

As mortgage debt plays a big role in equity value, it is worth looking at the balance sheet. Some recommend looking at leverage, such as the debt-to-equity ration. But in practice, it is difficult to tell when leverage has become excessive. It is more important to weigh the proportion of fixed versus floating-rate debt. In the current low interest rate environment, an REIT that uses only floating-rate debt will be hurt if interest rates rise.

The Bottom Line

REITs are real estate companies that must pay out high dividends in order to enjoy the tax benefits of REIT status. Stable income that can exceed Treasury yields combines with price volatility to offer a total return potential that rivals small capitalization stocks. Analyzing an REIT requires understanding the accounting distortions caused by depreciation and paying careful attention to macroeconomic influences.

by David Harper, CFA, FRM

In addition to writing for Investopedia, David Harper, CFA, FRM, is the founder of The Bionic Turtle, a site that trains professionals in advanced and career-related finance, including financial certification. David was a founding co-editor of the Investopedia Advisor, where his original portfolios (core, growth and technology value) led to superior outperformance (+35% in the first year) with minimal risk and helped to successfully launch Advisor.

He is the principal of Investor Alternatives, a firm that conducts quantitative research, consulting (derivatives valuation), litigation support and financial education.

Read more: http://www.investopedia.com/articles/04/030304.asp#ixzz1hP7YdcJp

Property investing: cash towers over trusts

Property investing: cash towers over trusts
Carolyn Cummins
December 1, 2011

Overseas investors are pouring money into commercial property in Melbourne.

THE virtues of investing directly into property by asset acquisitions or indirectly through real estate investment trusts have been brought to the fore with two reports indicating that bricks and mortar win every time.

But size does matter, with high net-worth investors able and willing to buy directly, while smaller investor err towards the REIT sector.

According to Emerging Trends in Real Estate Asia Pacific 2012, from PricewaterhouseCoopers and the Urban Land Institute, overseas investors are pouring cash into the Sydney and Melbourne commercial property market through acquisition of office blocks and shopping centres.

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PwC real estate leader James Dunning said the report indicated Sydney was one of the lowest-risk markets in the Asia Pacific region. ''Sydney has jumped from seventh position to third-most favourable investment destination, behind only Singapore and Shanghai. Melbourne has also improved, moving from ninth to seventh spot.

''Melbourne is also one of the region's most important markets, despite its construction levels cooling. For both cities, prospects over the next year are cautiously optimistic.''

In contrast, the indirect Australian REIT sector's recovery from the global financial crisis continues to be hampered by 
- international economic uncertainty, 
- short-term debt maturity and 
- unsustainable gearing levels.

According to Ed Psaltis, head of property and REIT Group at PKF and author of the REIT Monitor for 2011, these factors continue to affect investor confidence, resulting in many REITs trading at discounts to their net tangible assets, further segmenting the sector.

''Despite considerable efforts … to extend debt maturity and reduce gearing levels, both factors remain far too high,'' he said.

Read more: http://www.theage.com.au/money/investing/property-investing-cash-towers-over-trusts-20111201-1o87z.html#ixzz1h4iA8mXi