Tuesday, August 14, 2012

IGB Reit: For those who have limited alternatives and lazy to do any analysis

Properties had its run the past few years especially after the 2008 crisis when most central bankers have the view of keeping interest rates at their lowest. Liquidity suddenly became over-plenty and banks have to find places to lend to - not businesses supposedly for economic growth (as they are getting riskier) but the other side of it - consumer credit (basically asking us to spend). With that, property developers would obviously have their killings, not bothered about affordability level of the man on the streets down there when their concentration been on high end properties. Hence, the focus have been on how nice your new unit will be rather than the practicality side of it.

Now let me ask that person on the street (me inclusive), with return so low (3%) from the safe haven money keeping in the bank, where am I to put my savings? Some went for properties which have now gone amazingly unaffordable. Stocks? Over the last few years, it had its run as well. Many people are going for the tried and tested such as Nestle, Dutch Lady, Digi, Carlsberg. Even F&N which has suffered from Coke's eagerness to compete still sees its share prices continuing to go higher (forget about the rumours of there are several interested parties). What are the causes of this? People are running out of ideas on where to put their money - and South East Asia has apparently now become a safe haven. How nice.

TheEdgeDaily had a nice piece on IGB Reit yesterday. It basically had the notion that Malaysians (both people and institutions) are willing to pay more for less. At RM1.25, we are willing to get a 5% return from another so-called tried and tested. There is no doubt that IGB Reit with its Mid Valley retail Mall as the prize is one beautiful property. For those who are not sure yet, let me bring you there - every inch is occupied - seemingly. Every single day are pack with people - weekends and weekdays, holidays, non-holidays. There are not many more properties like this, despite the seemingly over building of retail malls. Successful retail malls feed on the expiring date of most tenancies - as it is the time to increase their rates again. If you are not willing to pay for the hike, plenty more are waiting in line for your lot.

Now, think again - with savings rates so low, inflation on the rise - on paper or not. Properties now as investments? Maybe not. What are the alternatives if we are not seriously into stocks? Perhaps this IGB Reit is still a decent and tolerable safe haven despite its not so attractive yield. Like it or not, we have to look for better alternatives than the money in the bank. This is also attractive for the shoppers as rather than spending your money at Mid Valley, what about making your money from there? Hence, next time you are at Mid Valley, rather than just doing shopping - look at the crowd. You should be happy with more crowd, hence  potentially signalling time for your little investments to do well.

I am not going there though, as I like the challenge of doing more - as in slightly riskier investments. At least for now - but never say never.


khengsiong said...

I am sure lots of people will apply for this IPO, and the odds of getting it is slim. And, the price will shoot up on the first day of listing.

Most likely I would skip it also...

khengsiong said...

BTW, while the yield is going to be average, share price is likely to go up. Therefore those who manage to buy IGBREIT at IPO price would enjoy capital gain.

I wish I know how to work out the 'intrinsic value' of a REIT, but the Discounted Cash Flow Analysis doesn't seem to apply here...

hc said...

If u keen on IGB REIT, u can buy krisaaset share.. They giving 5.243 lots of IGB REIT + RM 2430.

felicity said...

Ya Kheng SIong, Thanks. I think IGB Reit's price is fair.

DCF would not work as this is not a termed investment. Mid Valley Mall is a long term investment. Like you said, buying Kris Asset is an alternative.

eKimkee said...

I did a simple calculation compare to the few local largest cap REIT.
IGBREIT is still the cheapest but the room to go up is less than 10%. unless those REIT continue to shine. Fair value should be around RM1.36.

FreeMan_自由人 said...

Can I hv 1 Q... the asset calculation hv been done before the recent q report.

shud I said that, the latest earning, before calculate this IGBReit+cash distribution to shareholder, STILL 'parked' at some where.

Meaning to said, some hiding $$$ still being hold by the KASSET, which later, it will still need to distribute to Share holder?


felicity said...

Sorry have been busy all day. Kris Asset would be delisted and wound up - meaning they would distribute everything to the shareholders and leave a small amount for the delisting and winding up exercise.

FreeMan_自由人 said...

thks Bro, nvr mind abt the late reply, I'm more care abt quality reply. Cheer~~~

Just think of buying in more, I 've bought few lots already, from 7.9 to 9.18.

The recent market sentiment make me 'force sell' half of my share. So, plan to place big bet on this.

The simple calculation of 9.15 KASSET equvalent to ~1.3 of IGBReit, but if got some hidding $$$, means it shud worth >1.30.


felicity said...

be careful on short term trade...:)

FreeMan_自由人 said...

Boss, counted wrongly... the KASSETs ex-price was taken for 524 x 1.38(IGBReit closing price).
Thus, all calculated premium gone like wing.
Good lesson learnt, and don't know why KASSET share still can rose 30cents, any comments?

felicity said...

I personally feel that IGB Reit's shares has limited upside. The valuation is already quite full unless you can be convinced of the Mid Valley's further potential for further growth. Having said that, it is a good long term hold rather than trade.