KC Chong, thanks for your excellent articles in i3investor. I have been reading them for the past 7 years. You have guided & taught me value investing. Very much appreciated.
Just to add: A good REIT would acquire yield-accretive assets via financing rather than relying solely on rights issues (which have a dilutive effect). That's why one of the metrics to watch for investors picking REITs into their portfolio is the gearing ratio. Malaysia sets a 50% statutory ceiling for REITs (raised temporarily to 60% during COVID) and so if you see REITs with very low gearing, that tells you that they've got lots of space to pick up good assets. Axis (geared at around 20+%) is consistently good at this, for example. With that said, some REITs take on a holding pattern rather than seek to acquire more, even if their gearing is low. IGB and KLCC are two. So those are very conservative choices I'd say. One thing to note about REIT payout ratios is that they are legally required to pay 90% of their income out in dividends or otherwise pay the same taxes as other listed companies. Dividends are then taxed 10% before they arrive in the shareholders' pockets -- but overall still lower than the gov would take out of a regular company. That is part of the equation when considering these. Overall, as with all investing decisions it's the details that matter, and context. And a bit of luck.
Axis REIT has a relatively low gearing ratio despite multiple acquisitions each year because of the many rounds of private placements. Those yield accretive acquisitions are partly off set by dilutive effect on existing shareholders.
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KC Chong, thanks for your excellent articles in i3investor. I have been reading them for the past 7 years. You have guided & taught me value investing. Very much appreciated.
That was a good motivation comment from you Connie. Thanks.
Great video! Please keep this format going :D
Just to add: A good REIT would acquire yield-accretive assets via financing rather than relying solely on rights issues (which have a dilutive effect). That's why one of the metrics to watch for investors picking REITs into their portfolio is the gearing ratio. Malaysia sets a 50% statutory ceiling for REITs (raised temporarily to 60% during COVID) and so if you see REITs with very low gearing, that tells you that they've got lots of space to pick up good assets. Axis (geared at around 20+%) is consistently good at this, for example.
With that said, some REITs take on a holding pattern rather than seek to acquire more, even if their gearing is low. IGB and KLCC are two. So those are very conservative choices I'd say.
One thing to note about REIT payout ratios is that they are legally required to pay 90% of their income out in dividends or otherwise pay the same taxes as other listed companies. Dividends are then taxed 10% before they arrive in the shareholders' pockets -- but overall still lower than the gov would take out of a regular company. That is part of the equation when considering these.
Overall, as with all investing decisions it's the details that matter, and context. And a bit of luck.
Axis REIT has a relatively low gearing ratio despite multiple acquisitions each year because of the many rounds of private placements. Those yield accretive acquisitions are partly off set by dilutive effect on existing shareholders.
Great podcast! All I can say is everyone has different investing philosophy and risk appetite.
Hey there, really enjoyed the video - would love to get these as audio only, are you on audea?
nope, but we are on spotify! bit.ly/firlpodcast