A yield war ensued recently with both the new REITs in town — CMMT and Sunway Real Estate Investment Trust (SunREIT) — raising their retail yields to 7.6% in a bid to attract the same pool of investors.
SunREIT was listed last Thursday. Despite the hype over Malaysia’s largest listing this year, the shares fell from their institutional price of 90 sen to close at 88.5 sen on the first day of trading. It closed unchanged at 88 sen yesterday.
RHB Investment Bank Bhd, SunREIT’s stabilising manager and lead adviser, has had to undertake stabilisation on the stock to prevent a drastic decline in price, through the purchase of 30.5 million units or 35% of the total oversubscribed units of 87.1 million.
The purchases were made at between 87.5 sen and 89 sen as of yesterday, close to the retail IPO price.
RHB IB was over-allotted 87.1 million SunREIT units and as the stabilising manager, it may buy up to that number of units.
Analysts said SunREIT’s drop could be due to profit taking by retail investors who had purchased units at the initial public offering (IPO) price of 88 sen.
However, as there was no over-allotment of units in CMMT’s IPO upon the closing of the institutional offering, no price stabilisation will be carried out by the stabilising manager.
Analysts generally agreed that CMMT was not too different from SunREIT as they both appealed to similar risk-averse, defensive investors.
“But since CMMT is a pure retail play, you can play a more active role in choosing your investment rather than relying on the REIT managers. It benefits investors who would like to solely invest in retail,” analysts said.
Analysts also had mixed views on CMMT’s sponsor, CapitaMalls Asia Ltd (CMA).
“CMA’s business model has been replicated in other countries well and with the 10th Malaysia Plan and the progression of Asia, I am bullish on retail,” said one analyst.
Another analyst added that due to lifestyle and income differences, Malaysian retail did not receive the same attention as in other wealthier Asian nations such as Hong Kong or Singapore.
“Gross domestic product (GDP) in 2009 was US$265 billion (RM907.5 billion) across the Causeway, almost 1.5 times as high as Malaysia’s GDP of RM679.7 billion. Additionally, we have higher inventory levels than Singapore. Malaysia is a different market,” he said.
OSK Research and MIDF Research both said CMMT was likely to offer limited short-term and medium-term upside to its unitholders.
“However, CMMT, the second-largest trust will have the largest free float of 58.3%, so the ‘premium’ may be justified,” said OSK.
An analyst from MIDF added that CMMT had not yet convinced him on its long-term growth strategy.
“There are some challenges in growing by acquisition as ideal retail properties are scarce and may come at a price. In terms of organic growth, they are experiencing high occupancy rates of 96% or more. It remains to be seen how their future growth strategy will pan out,” he said.
This article appeared in The Edge Financial Daily, July 15, 2010.
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