Thanks bro for the clarity. Sentral reit do look attractive too, with price hoovering around 0.86c. My bet looking at market sentiment & FMCO, price will slide further around 0.60c i guess (which am willing to wait).
It is the cheapest REITS in malaysia to real physical value (cost approach). Cheapest Dividend to Price value. Say Dividend ratio is fair valued to industry average 4% yield. (Average 3.5 sens / 4%) = 87.5 sens (based on industry average)
Following the disposal, the REIT will incur net loss on disposal of RM4.93 million.
It is noted that Menara AmFIRST was first acquired by the REIT in 2006 for an initial cost of RM57.1 million. As at end-March, its audited net book value stood at RM64.6 million.
“The manager opines that considering the age and limited scope for growth of the asset, it is opportune to dispose of this asset to repay existing borrowings to optimize the trust’s gearing level,” the REIT said.
It added that the proceeds will be used to pare down its existing borrowings.
The proposed disposal is expected to be completed by 3Q22, it said.
It's an old building, only 60% occupied. Probably only earning enough to cover the loan repayments. Better for them to clean up their balance sheets. Take a small haircut now, NAV will still be way above current market price.
With the dividend payout of 1.93 sen last May and estimate to have another 1 sen this December; at current price of $0.38, we will have slightly more than 7% of net dividend for this year. Also good potential for long term holding with NTA stood at $1.17 which is >3 times the current share price.
The price has been on downtrend since early 2012, with sign of stabilizing in 2018; but continue to downtrend for couple of year, then on sideways since. At current price, I think the downside is limited. I have been buying since early 2018 and averaging down with current average cost at ~$0.48 excluding dividend and ~$0.415 considering dividend, mean loss of ~11.5% at current price of $0.36. Malaysia interest rate increase is quite moderate in my opinion. With gearing ratio at 49.5% or slightly more than $820M, the interest impact is not that significant and still tolerable. The occupancy rate on some of the property are worrying though, hope the management will work harder to improve the performance.
The performance of AMFIRST REITS is truly disappointing. The NAV per unit is around RM1.17 and yet the last traded price is RM0.345 . The average annual return based on total return per unit since its listing date on 21 December 2006 is practically zero. I have interest in this counter and would like to bring out some options that are floating around that might provide some relief to the minority shareholders.
1) The major shareholder or anybody could privatize AMFIRST REITS by buying out the other shareholders at say half the NAV per unit of RM1.17 which comes to RM0.585 . Taking a REITS private has been done before. Take the case of AHP REITS of which I have interest indirectly. It was taken private at RM1.00 per unit when the last traded was around RM0.80 +- .
2) Sell some more buildings with low occupancy even at a discount to their market prices. This will help to reduce borrowings which will be useful in an increasing interest rates regime. There is no point keeping so many building buildings. It is possible Malaysia could have a recession looking at the worldwide economy currently and if that happens , one might find difficulty in selling.
3)There was talk of having a PP (private placement). Generally this is not in the interest of minority shareholders. Moreover the amount raised will be minimum at current unit price and does not make a dent in the borrowings. Let us assume the placement price is at a 10% discount and the placement quantity is 20%. This means that the amount raised will be 0.9 x 0.345 x 0.20 x 686 = RM42.6006 millions. This amount does not make a dent in the total borrowings of around RM800 millions. The minority shareholders get a rotten deal since the NAV will be reduced quite a lot and the earnings per unit could be diluted. One possible solution is for the parties taking up the PP to push up the unit price of the REITS before the PP is announced.
It is true the parties taking up the PP would prefer a lower price. That is why I always feel a PP is a rotten deal for minority shareholders since they suffered so much and yet to received salt rubbed on their wounds. My point is this . The price is so low ( I think this reits P/NAV is the lowest among the reits) and as such the PP would not bring in much money. Since a PP is a private deal , why don't the management make a deal with the parties taking up the PP to push up the price by a certain percentage before the PP is announced. This will help to bring in more money and appease the minority shareholders. Anything is possible if the management care for the minority shareholders. If not consider other options . After all the majority shareholders have deep pockets.
Since 2015, the yearly (taxable) dividend has dropped at nearly 9% per annum, instead of growing. 2015 dividend was 4.59 sen. Subsequent years dropped to 3.65 (2016), then rise a bit to 3.78 (2017), but dropped again to 3.6 (2018), 3.015 (2019), 2.538 (2020). In 2021, tries to go up to 2.718 (2021) but dropped again in 2022 to 2.43. The question is will this dividend keep dropping in future years? This REIT has lost a lot of trust with investors since 2015 and probably since peak at 2013 and before that.
Its 2 Cyberjaya Office properties (Prima 9 and 10) hasn't panned out well. Prima 9 is terrible occupancy. The optimist could say with below 50% occupancy, maybe the only way is up, but that Office property is not attractive. REIT is only as good as its ability to deliver revenue, profits and eventually dividends.
At current price of 0.32 to 0.335, stock is making new all time lows which attracts bargain hunters. I will make my first entries at 33-33.5 sen. At this price, it should have reflected most of the fears. Price is still downtrending - e.g. it still trades below the 200dMA, but the low price requires courage to enter when everyone else is fearful.
The concern with this REIT is its high interest expense relative to its declining revenues. REIT still needs to make profits to deliver the high dividends to shareholders. At 31/3/23, the interest expense is 31.3m giving only 14.2m PBT. Whereas the year before, interest expense was lower at 26.8m. The weighted average cost of interest is now 4.42% vs 3.18% the year before. If rates keep rising and revenues don't improve, price and dividends will keep reducing. The gearing ratio is not too bad at 49% but other details like average cost of interest, revenues, etc. matters also. At the end of the day, this REIT is still a business and it needs to deliver the profits to shareholders.
With NAV of 1.17, the best way is for management to do its job i.e. consider ways to unlock and sell some of the assets to pay off debts, reduce its interest expense, and pay more profits to shareholders. Either Management is not competent, or the market values of these properties are not real i.e. just what's appearing on paper only and cannot be realized in practice. Management probably needs to change.
The REIT pays 2x per year dividend. Last 2 dividends is 2.43 sen, giving a Dividend Yield of 7.3% at 33.5 sen. 7.3% is higher than EPF rate, but this dividend is more likely to reduce over the next 5 years than EPF. The reason is because if interest costs keep rising then, the dividend is likely to keep dropping.
So, to compensate shareholders, a price of 33 to 33.5 sen is needed to give 7-8% dividend yield.
I am sorry my earlier posting disappeared . I am not sure what happened. Anyway based on the article in the theedgemalaysia ( June 28,2023 ) there should be a net increase of 64000sf in occupancy at USJ Summit when all the seven tenants moved in. Given the rental rate of RM5 psf the net increase in revenue should RM5 X 64000sf X12 = RM3,840,000 per annum. The increase could be higher as NSK will lead to more customers which means more parking lots will be occupied. I hoped my calculations and inferences are correct.
AmFirst is a Bursa Malaysia mix-sector REIT that has seen declining occupancy despite a growth in the leasable area.
AmFirst failed in its mission to deliver sustainable long-term income distribution and investment performance:
• The annual dividend had declined from an average of RM 0.09 per unit (2008 to 2010) to an average of RM 0.03 per unit (2020 to 2022).
• The Book Value had grown by a 1.0 % CAGR from 2007 to 2022.
• The average FFO per unit had declined from an average of RM 0.11 per unit (2008 to 2010) to an average of RM 0.08 per unit (2020 to 2022).
From a unitholder’s perspective, from 2011 to 2022, I achieved a gain of 0.9 % CAGR. Not exactly great compared to the returns from keeping the money with the EPF. I would conclude that my investment in AmFirst was a mistake. It may previously have been a good Bursa stock. But I am not sure this is still the case. For an infographics of this stock, refer to https://i.postimg.cc/FzsZ10cW/AmFirst.png
For snapshots of AmFirst or other Bursa companies refer to my blog article “Are these outstanding stocks - what to consider? (Bursa Malaysia)”
Post a Comment
People who like this
You should check in on some of those fields below.
Click Confirm to delete this Forum Thread and all the associated comments.
Please Sign In to report this post as abuse.
【DEC 12】Order Flow Mastery
New Update. Discover investment communities that resonate with your ideas
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....