Gold Investment - II

This is my second series on gold investment. In my first blog, I only managed to explore the gold investment opportunities offered by Maybank. This time, thanks to Nik2004 from another Real Estate Forum, I came to know the gold offering by UOB Bank, which is much better than of Maybank.

UOB Bank offers a number of physical gold tradings, such as Australian Nuggets, Gold Maple Leaf, KineBar, Pamp Gold and Singapore Lion. Similarly, they come in several sizes in ounce (oz) or gram (g). And of course, the most economic in term of buy/sell spread is again the largest size gold, which is 1 oz. I found that 1 oz Aust Nuggets, Gold Maple Leaf and Singapore Lion has the cheapest spread, which is about 2.24% base on bank selling price. Compare to Maybank Kijang Emas which is about 3.18%, UOB offerings definitely more attractive. I found an intriguing fact which is this buy/sell spread determined by bank with each type of gold investments are actually not fixed. As of today, the spread with the few types of gold from UOB is RM56-57, but in a few weeks back, it was actually at RM65-66. Same case to Maybank, very puzzling! Nevertheless, with the quite big of gap between UOB and Maybank gold, I believe that UOB ones will still be a better buy at anytime. For UOB daily gold price, please refer to this link.

Again, I made a call to UOB bank to confirm that these golds are not actually available at their every branches. Only selected branch will sell certain types of gold but most of them will able to buy back all types of gold in their offering. So, in order to make sure your gold trading can be done at specific branch, make sure you call them to check out before make your visit. All UOB branches and their contact numbers can be found here.

To store your gold, it is also best kept in a safe deposit box in a bank, by paying a small annual fee. Unfortunately, I checked through UOB website and safe deposit box is not one of their service / product offered. It is a pity that one has to carry out the gold from UOB and keep it with other banks that offers such service. Of course, it will not be a problem if one has a safety box at home...hahaa. This is the part of gold investment that I hate most.

I have decided to allocated about 20% of my total investment value in gold. And after much consideration, I will buy the 1 oz Gold Maple Leaf because of its reputation and cheaper cost. At current entry price of gold about USD610-630 per oz, I think it is a good bet with the hope that gold will bounce back later this year and thus hedges partial of my money from inflation.

What do you think about gold? Please feel free to leave your comment.


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Portfolio 26-Aug-2006

This week, my basket of stock selection finally gave me more impressive gain compare to many previous weeks of boring performance. My portfolio value has inched up by 1.72% (+RM1438) while KLCI only increased by 0.90%.

Main gainer of course has to be Magnum, gaining an impressive 6.89% from last week. As mentioned in the previous post, Magnum quarterly result was indeed impressive and at current price of RM2.14, its PER is only 12.3. This is quite comparable to BJTOTO with PER of 12.5. These numbers are low mainly due to their improved EPS. I am earger to look at the coming balance sheet of BJTOTO and Tanjong to determine if the overall market for gaming sector has expanded. I have a thinking that maybe due to current tougher economic condition, there are more people resort to betting in hope for a sudden windfall...hahaa, what a crazy thinking. My current target price for Magnum is RM2.30, in anticipation for further share buyback and re-valuation of gaming counters. Hopefully, BJTOTO will also show an impressive balance sheet mid next month.

The only disappointment I have in the week is with the ROS announcement by YTL Corp. Although YTL Power has registered a good quarterly result with profit increased by 17.8%, it did not manage to lift up the share price. As I have suspected, the ROS will create more negative impact to YTL Power and its warrants than a good earning can turn it around, I have indeed placed a selling order of half of my stake in YTL Power-w at RM0.61 on Friday morning, but failed to be carried out. At yesterday closing price of RM0.58, I think that the warrants is set at a dangerous level compare to its mother share which has lost 7 sen in a day. Personally, I don't see much capital gain potential on YTL Power-w because of the dragging IPA issue, and its future price when ROS is executed. I believe there must be some amount of profit taking by retail investors after receive their ROS and that definitely will batter the share price. This is simply another case of supply-demand balance. Logic tells me to sell out my stake now but emotionally I hate to cut loss. Although the warrants price has been consistently in downtrend and almost reach to bottom, I suspect in coming few weeks, its price will still go down slightly and then stay a while at RM0.50 - 0.60 range. Hard decision for me, after all, I hate to sell out at bottom trough but on the other hand need to correct my share exposure in short time.... Tough!

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Magnum Quarterly Result 30-June-2006

Magnum Corporation Bhd posted a net profit of RM66.48 million in the second quarter ended June 30, 2006, up 36.1% from RM48.85 million a year earlier due to higher sales and lower prizes payout ratio.

It declared an interim dividend of six sen less tax.

In a statement on Aug 23, Magnum said revenue rose 11.2% to RM716.02 million from RM644.08 million due to higher gaming sales, which grew 11.4% on the back of an additional draw and mBox sales.

For the first half, its net profit was 11% higher at RM126.9 million against RM114.35 million a year earlier, while revenue rose 7.9% to RM1.5 billion versus RM1.39 billion.

quoted from The Edge Daily, 24th-Aug-2006

Magnum has posted an excellent result yesterday. Despite World Cup which traditionally lowered the total revenue of gaming companies, Magnum managed to register 11.2% rise. Contrarily, in World Cup 2002, Magnum suffered 2.5% Y-o-Y drop in revenue. This is mainly owing to its increased sale of m-Box, a similar gaming product that was initially launched by Tanjong as I-Box. It is a renovative product where with just RM1, one can bet on all the permutations of a 4D number. I think it must attracts a lot of small punters such as foreign labor and maid. Furthermore, this product also provides better profit margin. Recently, Sports Toto also followed the herd and launched I-Perm.

With the jump of 36.1% in profit, EPS for half a year of Magnum now standing at 8.70 sen. If Magnum can keep up with current performance, whole year EPS is estimated to be 17.4 sen. At current price of RM2.04, this equals to PER of 11.7! Very attractive I would say. Besides, Magnum's nett cash has increased to RM814 millions!

On the prize payout ratio, Magnum always performs the worst among the other 2 competitors. For the six months period, it is somewhat disappointed to hear that the ratio is marginally increased compare to the same period last year. Personally I view this as a blessing in disguise. This is because higher prize payout ratio will definitely make Magnum more attractive to punters and thus maintain its market share in 4D betting. I think that as long as the ratio is not ridiculously higher than the competitors, it is necessary for Magnum to fence off market share domination, especially from BJTOTO, since the latter has more variety and popular products.

Coupled with its latest 6 sen dividen declared, I strongly think it is a good buy.


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Portfolio 19-Aug-2006

My stock portfolio value was up slightly by 0.49% (+RM378) this week compare to KLCI, which has fluctuated in tight range of 938-946 and ended 942 or down 0.03%.

Main gainer was BKAWAN, which gained 5.08% over the week. At current price of RM9.30, it is very close to my previously set target price RM9.50. Its quarterly report is due to be announced by end of the month, and hopefully another interim dividen will be declared. In view of current bullish stance on CPO price, I will hold BKAWAN at least until the coming earning announcement, and evaluate further whether to keep it for long term.

Another gainer was Tanjong. Tanjong has rebounced 3.85% from last week price of RM13.00. I am looking forward for its price to pass the level of RM13.80 in order to start reducing my stake on it. There is indeed very little foreseeable excitement laying ahead except hoping for continuous rise of KLCI and so its share price.

The biggest loser this week was Magnum, dropped 4.69%. On Monday, I have purchased another 3000 units at RM2.07, with speculation that its price will be pushed up further. However, that did not happen due to the lacking of share buyback activity. Magnum only did a share buyback on Friday. It is interesting to note that the share price on Friday was also being stirred up to highest RM2.09. To me, it is evident that if Magnum continued it share buyback campaign, its price will inevitably rise in tandem.

For next week, I will keep my eyes on AXREIT. I intend to accumulate more of the share before the budget announcement next month. Like many others, I believe government will revise the foreign tax holding for local REIT to encourage foreign investment. I am waiting to buy more AXREIT at price below RM1.73, which I hope it will reside from current level after the 6.2 sen dividen ex-date on 21-Aug.


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Tips: Get Your Stock Quote Cheaply on Mobile

Many times, when we are on the move, and eager to know the latest stock price, we always find it is either difficult or rather expensive to get a realtime stock price quote. Of course one can always call his/her remisier and ask, stop by to look for a PC like internet cafe, or subcribe to many more expensive mobile solutions such as 3G, Hotlink Stock Live Service, EasyAcess, SMS Stock...etc.

However, there are actually some other inexpensive ways exist. Now, I'm going to share with you one of my way to do that easily and cheaply, at only 1 sen per quote with no monthly subscription fee! So here how it works...

Requirements:
1) A GPRS enable mobile phone preferable with big colour screen
2) Hotlink prepaid (for postpaid and other telco, you need to check out the rate for GPRS)
3) Mobile browser, highly recommend Opera Mini (download as link)

The steps are easy, just download and install Opera Mini to your handphone. You can use a USB bluetooth donggle on a PC to "push" the Opera Mini applet to your handphone and it will install itself.

The trick is to find a source that is small in data and precisely gives you the stock quote that you want in real time. Personally, I use OSK188. If you go to the website, you will observe at the top right of the page, there is a small javascript that enable user to get realtime stock quote. Of course, you do not want to load the whole website everytime. Doing that will cost you a bomb and waste your time. You just want to get instantly to the stock quote. So, instead key in www.osk188.com to you Opera browser, you need to key in http://www.osk188.com/MASA/stock_search.jsp?stock=xxx. Replace "xxx" with the stock symbol of your choice, e.g. bjtoto.

The advantage of GPRS is the cost is count by size of data. It doesn't matter how long you stay on with the browser or how long it takes to load the data. For the stock quote of OSK188, it only has less than 1kb in size, which is only 1 sen using Hotlink. With Opera mini, instead of key in the long address everytime, you can just add it and several others with your favourite symbol as bookmarks. Below are some examples how the stock quote from OSK188 look like:

Tanjong BKawan Magnum

For easy setup, I have made a few illustrations to guide you as below. Enjoy!

Related info:
a) For Digi user, there is an alternative cheap solution here.

Hope you find this tips useful.

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Magnum vs BJTOTO

After my recent purchase of Magnum base on speculation, I did a simple research looking at some of the fundamentals of Magnum compare to BJTOTO. Here I am to share:

a) Price Earning ratio (PER)
Earning per share for Magnum and BJTOTO is estimated at 14.2 sen and 32.8 sen respectively for Y2006. Base on Magnum price of RM2.07, this equals to PER of 14.6. For BJTOTO, with current price of RM4.42, its PER is 13.5. Obviously, Magnum doesn't look attractive, especially with the fact that most analysts will put a discount on fair PER for Magnum because of its non-market leader position in gaming sector.

b) Nett Cash
Magnum has piled up RM683.8 million of cash as reported in 1Q2006 while BJTOTO has -RM82.3 million in debt reported in 4Q2006. However, after settlement of inter-company loan, BJTOTO is expected to have RM450-500 million. For Magnum, after preceeding of Sepang land sale, it will has additional RM210 million. Considering a nett cash position of RM700-900 million, Magnum is capable to return back shareholder RM0.85-1.15 per share. While for BJTOTO, Macquarie anticiapted it will be able to distribute 35-39 sen of special dividen. However, one must take note that the cash pile of Magnum has been built up in years and Magnum had not been generous in dividen payout in the past.

c) Dividen Yield
From past history, Magnum will typically give out 10.0 sen per share dividen compare to 40.0 sen of BJTOTO. This translates to dividen yield of about 5.0% and 9.0% respectively. Again, for long term investment, BJTOTO is much more attractive than Magnum.

d) Potential Earning Growth
Magnum has been volatile and high on the prize payout ratio compare to BJTOTO. Moving forward, analysts are expecting Magnum to improve its payout ratio from 70-75% to below 70%, in line with industry benchmark. This will able to improve EPS of Magnum. For BJTOTO, analysts are confident that it will continue to expand further in market share, despite its current leading position.

So, after this simply study, I have to admit that my latest purchase of Magnum at RM2.07 appears to be quite expensive. AmResearch rate HOLD on Magnum recently at RM2.00. If we apply fair PER of 13 to Magnum, its fair price will be about RM1.85. However, I doubt that with its current price trend, Magnum price will drop back to that level.


Related articles:
1) Brokers' Digest
2) Corporate: End to BToto's intercompany loan woes soon


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Trading: Magnum

Yesterday, I made a speculative move that was opposite with my overall strategy; I bought in additional 3000 units of Magnum @ RM2.07! I made this decision when I noticed that Magnum price has dropped as much as 6 sen from last week closing price at noon. Without second thought, I called my remisier to place the order.

The reason for this is I believe Magnum price still has a lot of room to increase from its current level, supported by share buyback activity of the company, which has >RM700 million of cash in spare. When I made my portfolio update last week, I observed that Magnum was offering RM2.04-2.10 on Friday. I reckon RM2.07 is still a fair price for which Magnum is willing to support. This is further confirmed with the move of Magnum yesterday, at RM2.07-2.10. I understand that this speculative move is very risky, as I have no idea how is the valuation of Magnum compare to BJTOTO at this current price. My purchase of Magnum is purely base on speculation that the price will be further pushed up and also hoping for a windfall like special dividen to be announced. Hence, I quickly make this write-up to note down all my thoughts now for my own reflection in future. Whether this will end up to be a winning or losing move, it still serve a lesson to me. Indeed, I have taken the precaution and limited the purchase to 3000 units, which I have thought earlier to buy 5000 or 10,000.

Technically, like OSK has published, Magnum price is on bullish trend in my opinion, with supporting level at RM1.95. OSK has put an immediate target price of RM2.25 and RM2.45 for longer term. Although I really hope that it will be true (and think it will for once), but I am afraid to believe even 50% of what OSK has recommended, especially on a buy call. From my past experience, 9 out of 10 of their analysis missed, and missed a lot hell from what they have estimated!

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Portfolio 12-Aug-2006

At first, I thought I'll skip my portfolio update this week. However, there are some big price movements in several stocks that I have and decided to do this update as a note for myself.

First, KLCI has inched up by 0.46% last week to 942.27 points. On the other hand, my portfolio has made a terrible loss of 0.69%. I said this is terrible not because of the overall percentage, but particular to few counters that I have, namely Tanjong and YTLPWR-w.

Tanjong has dropped as much as 5.8%, which is about -RM2000 for me, while YTLPWR-w lost 5.1% (-RM600). I have mentioned last week that I think both for both counters, their share prices are already at depressed level. With KLCI at about the same 940 points (during mid-Apr this year), both counters were priced at ~RM14.50 and ~RM0.74 respectively. These were their price before the government allows TNB to revise its power reserve level, which affects IPP. However, both counters dropped even further last week, that raised my alert.


For Tanjong, I did a plot with ChartNexus, and observed that there is a strong resistance/support level at ~RM14.00 base on price history of 1 year. Tanjong has been continuously sold down in last week, and to me the next support level (although a weak one) will be at ~RM12.80. There was no major transaction by shareholder or any new negative news, I was puzzled. Tanjong is a good counter, with diversified business and dividen yield of 5.5 - 6.0% base on current price. Revenue of power plants in Malaysia contributes about 50% of its overall power business, which I think the new negotiation in IPA will only has limited impact to Tanjong. If it is not because I have a pessimistic view on economy for coming 6-12 months, and also my current high weighting on Tanjong, I will not hesitate to accumulate more when it drops further. Now, I think I'll hold onto the Tanjong share I have, and monitor closely on news of Tanjong. I believe Tanjong should fetch a better price than now for me to sell.


As for YTLPWR-w, I am looking forward for its quarterly result to be announced in this month and hopefully its share price can rebound. The price gap between the warrant and mother share has widen a lot, mainly due to active share buyback of its mother share that support its price. I am regret that I did not take Investsmart recommendation earlier to trade off the warrants and buy mother share. I am prepared to cut loss (again!) at slightly higher price to minimize losses.

The main gainer of this week is no doubt Magnum, with ~8.7% price increment. So far, I have made about ~17% return from this counter including the dividen received lately in less than half a year, which I'm quite satisfied. As I mentioned last week, Magnum has continued to buy back its share actively and I believe they will continue this in coming few weeks or months. I'll only consider to sell my stake when the price start to stagnant and retreat.


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Bond Fund

Lately, I am wanting to do some researches in bond fund as I intend to re-invest the spare cash from stock market into it. I have read from book that bond is the right vehicle. Bond provides a stable, relatively higher return than FD of bank and most importantly, has an opposite growth trend than share during an economy downturn.

However, my intention to make such a research comes to a "pleasant" end when I discovered her blog, Emily Wee where she has summarized the best funds base on criteria of >5% return in 1-year that available in Malaysia. It really save me a lot of researching works, either from internet or magazine.

From her result, and excluding those funds of ILP (Investment-linked product), I find that there are only a few bond funds that are attractive to my perception. Maybe I have a bigger appetite, my target is set at >7% return in 1-year horizon. That only leaves me with either RHB or Pheim funds. The objective of buying bond for me is to temporarily hedge from a possible stock market crash, thus I am primarily looking for bond that really outperform during that time, base on its price history. Unfortunately, all the top 3 bond funds are too new that they have no reference during last recession of 1997-1998 or even later 2000-2001.

My next closest choice is Public Bond Fund, which has only 5.02% of 1-year return (2.95% if follow data of Public Mutual site). I have managed to obtain a performance chart of the fund from Public Mutual website as below. The total return since inception (~10 years ago) is 130.75%, which is average ~8.6% p.a. effectively. I reckon this is quite good, especially it performed very good when stock market was bottoming (e.g. in year end of 2001). I will consider to invest some amount of money into it but not too large the portion. The obvious reason of course is its so-so performance (~3 or 5% p.a.) during normal time like now and only performed well when in the bad time. Definitely, I do not want to be cursed for looking forward to bad time because of this investment...hahaa

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Recession Coming ?

Yesterday, U.S. Federal Reserve has finally decided to pause its interest rate hike after consecutively 17 rate increases in the past 2 years. Numbers have showed U.S. economic growth slowdowns rapidly and cooling happens in the property market. The U.S. Fed blames this as the laggered effects of interest rate hikes coupled with rising energy price.

Many economists have already louded that the recent years of economic growth in U.S. is only artificially supported by over-heated housing market and heavy consumer debt from home equity. Burst in property price will inevitably lead to recession. Judging from latest U.S. economic data, some has even predicted that the coming recession will be a sharp and hard one.

As Malaysia ecomomy is still highly depended on external demand, especially from U.S., we are likely to be dragged into the same boat as U.S. The implementation of projects under 9MP will only help to cushion the impact, but unable to reverse the trend. Reseach house such as RHB has earlier published a report on anticipation of economic downturn for Malaysia in Y2006-2007.

In the past 2 recessions of my life at 1987 and 1997, I hardly recall if they bear any significant meaning to me except hearing grumbling from parents and their friends of how hard was life then. If there really happen to be a recession soon, it will be my ever first "true" experience.

As there is a chinese wisdom saying "risk is an opportunity", I will make my fullest preparation to turn it into a great investment opportunity when the market has over-sold. It is much easier to pick an average stock that will outperforms when market recovers than to pick an excellent stock that perfoms in a stagnant market.

As such, I will accelerate my pace to correct my share exposure in next few weeks, in line with the economy development. I will likely dispose YTLPWR-w first follow suit by Tanjong. They are actually good counters but my strategy is follow both the fundamental and also the big picture of market timing.

Below I put the chart of KLCI from 2005 to now for everyone to ponder. Composite index has been fluctuating at range 850 - 970. To me, we have never had a real bullish market. What will be the next course, a quick bull follows with sharp drop or the market will start tumbling down from now? Regardless what is the case, I've decided to take the precaution earlier. Better safe than sorry...

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Portfolio 05-Aug-2006

It was another quiet week for me. My portfolio was almost inline with benchmark KLCI (+0.35%), gaining ~0.33% (or +RM253).

Gainers were Tanjong (+0.07%), AXREIT (+0.57%) and MTD (+1.69%) while loser was BKAWAN (-1.81%). Market has traded side way recently, without major breakout. Some has said that technically, there already appeared an uptrend signal last week and I certainly looking forward for that to reduce my overall stock exposure.

As one can see that my whole portfolio is currently dominated by power related counters such as YTLPOWR-w and Tanjong. These 2 counters alone already contribute ~60% of total portfolio value. Although both counters are not all about power business, but any new development between Tenaga and IPP on the PPA issue will definitely "swing" my portfolio.

I was actually a bit disappointed that this issue has to be dragged to the end of the year. On the other hand, I was also relieved that it seem both parties (to me, most importantly the IPP) are advocating to protect its own interest. It is already expected that the outcome will likely unfavorable to IPP, however I think the current depressed share price already factored in this concern. Any slight improvement on the negotiation that benefits the IPPs will definitely move their share prices higher.

On another note, Magnum has been actively buying back its share starting from 26-July. Until 4-Aug, Magnum has bought back about 5.37 million shares at an average price of RM1.95-1.98. This however only costs Magnum at most RM10.7 million, compares to it cash pile of more than RM700 million, excluding the additional proceeding from recent sale of Sepang land for RM210 million cash. Judging from this, I believe that the share buyback of Magnum will continue to carry on for some times, and it will be inevitable for its share price to rise gradually in tandem with stronger demand.

I will revise the frequency of my portfolio review from weekly to bi-weekly starting this week. As I continue to reduce my activity and exposure on common stock and focus on other more stable investment vehicles, this will enable me to do more researches and write up in that area instead. Unless there is a sharp change of stock market trend, I will not alter my strategy now.

At the mean time, please feel free to comment and leave your view / opinion / suggestion in the below comment section or the chatbox of sidebar. Looking forward to hear from you and happy trading.


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Starhill REIT

With my recent interest in REIT, I decided to take a deeper look into another seem "promising" REIT, Starhill which is among the few available in the market now.

Starhill REIT is currently owned 51% by YTL corp while only 49% is from public. Assets of Starhill REIT are Lot 10, Starhill Gallery and JW Marriott Hotel, which are all strategically located within the golden triangle of Klang Valley. Both Lot 10 and Starhill Gallery are currently enjoying near full occupancy rate, with majority of leases expiring by 2008.

Starthill REIT has indicated that they will distribute near 100% of income as dividen for the period to 1H FY2007, and thereafter 90% for each financial year. For the latest income distribution announced during end of last month (1H FY2006), which is 3.4524 sen per unit, it representing approximately 100% as what they have claimed. If Starhill can maintain the same income for the full FY2006, this will translate to ~7.5% yield, which is attractive.

However, if one delved into more details of Starhill, one will observe its future potential is limited. Firstly, the management of Starhill REIT (which is Pintar project Sdn Bhd, 70% subsidiary of YTL Land) has no plan to aggressively acquire new property (besides those owned by YTL) into its portfolio to improve its yield.

Secondly, the rental hikes of all current 3 properties of Starhill are very limited. JW Marriot Hotel only provides ~1% rental hike annually; Autodome, which is a subsidiary of YTL contributes ~67% rental income for Starhill Gallery, thus there is a conflict of interest for any rental hike; and Lot 10 is unlikely to fetch any significant increase in rental due to stiff competition nearby, e.g. Berjaya Time Square etc.

Thirdly, the distribution rate after 1H FY2007 will be reduced to 90%, effectively lower its overall yield.

With all the above factors and unfavorable interest rate outlook for REIT in the past 6-9 months, its share price has dropped from its peak of RM1.07 to now RM0.915, which is below its IPO price of 0.980. NAV per unit as of 4-Aug-06 is quoted at RM0.983, about 6.9% lower than its current share price.

I personally think that the annual yield for Starhill will remain at ~7% until 1H 2007 base on its current share price of RM0.915. After that, I believe that its yield will drop to 6% or below due to reduced distribution rate and bleak outlook for shopping mall related properties when economy takes a downturn. It will be worse when the bulk of Lot 10 and Starhill Gallery leases expired by 2008, if recession happened at the same time.

As such, taking into account also the risk of depreciating share price, I personally will only consider to buy Starhill REIT for short term (1 year or less) if its share price hits 86 sen or less. This will fetch a yield of ~8%, and at the same time, minimizing the downside risk for capital preservation.

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Axis REIT

I bought Axis REIT 2 months ago after reading the cover story from Personal Money magazine and a book "Road to Riches with REITs" by the famous sifu in capital market, Sherilyn Foong. At that time, I got different recommendations from the 2 sources, book and magazine.

Sherilyn recommended REIT investment strongly. As from her point of view, REIT is sort of "optimized" version of property investment, the next big thing in Malaysia (which was true for some times, but the heat faded off quickly, and the book was written in 2005). While on the other side, concerns of hiking interest rate (which renders the yield of REIT less attractive compare to fixed deposit), less than perfect regulation such as high taxation (28%) for foreign investor, too many red tapes for buying and selling property...etc from the magazine discouraged readers to invest in REIT.

Nevertheless, because of my target is to invest into some stable, relatively high yield generating stocks, I've decided to bet a small amount in REIT. Naturally, for one to invest in REIT of Bursa, there is only limited options, which are UOA, Tower, Starhill and Axis REIT. Despite Axis REIT price has appreciated quite a lot from its IPO of RM1.25 (while others are about or even below their IPO), I have decided to invest in Axis, because of the main reasons as below:

a) Most actively managed, constantly acquires new property for yield improvement

b) Commited dividen payout rate of 95%

c) Strategic properties with high tenancy rate, ~99% and long term MNC occupants such as AIA, Tenaga, Fuji Photo, Fuji Xerox..etc

Its share price has remained very stable along these 2 months, despite KLCI has fluctuated in range 885 - 935 points. And yesterday, Axis REIT brought another good news to its investor. With 6.2 sen interim dividen, which is equal to 97.2% dividen payout rate, it is impressive to me.

"Axis Real Estate Investment Trust (Axis REIT) posted a net profit of RM14.79 million for the second quarter ended June 30, 2006.....Revenue for the quarter ended June 30, 2006 was RM9.64 million while basic earnings per share was 7.18 sen. Axis REIT manager Axis REIT Managers Bhd also declared a 6.2 sen tax exempt interim dividend....."

Quoted from The Edge Daily, 01-Aug-06

If Axis can maintain this earning for 2nd half of the year, it will translate to ~12 sen per year. For the share price of RM1.68 (which I've purchased), this is equal to ~7.1% yield. At this rate, and judging from the stability of its share price (almost non-correlation to KLCI), I have to say that Axis REIT is a very attractive vehicle for me to temporarily place my spare money. Even if I quit before the next dividen payout, I will already received 6.2 sen (i.e. ~3.7%, which is almost equal to 1 year return of fixed deposit in bank). My calculation has also excluded the potential of capital appreciation, in my case, it has already rised ~4.7%.

In addition, I think the overall economy condition now is favouring toward investment of REIT, because:

a) Interest rate hike seem to put on a pause, with economy slowing down globally and locally, easing the concern of inflation

b) Relaxation of regulation / guideline from SC for growth of REIT. Latest change as reported in The Edge Daily as link

c) Potential lower taxation for foriegn investor by government in coming budget. This will attract foreign investment and price appreciation for current REIT.

So, for those who are interested to jump into the boat of REIT investment, make sure you grab some well managed REIT like Axis. The execution date of its current dividen payout is on 17-Aug. For me, I will collect more Axis when its price resides after dividen payout, but before budget. Also, please note that income from REIT dividen is subjected to Malaysian income tax base on individual bracket.

Related links:
http://biz.thestar.com.my/news/

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