The winner among the two newcomers to the M-REIT scene is likely to be the one that offers the highest yield, at least matching or close to the average yield of Malaysian REITs.
Total distribution to SunREIT unitholders is estimated at 6.7 sen for FY11 or a gross yield of 7.6% based on the retail IPO price of 88 sen per unit. SunREIT has committed to distributing all of its net profit in the first two years of listing and a minimum of 90% of annual profits thereafter.
SunREIT lists today on Bursa Malaysia.
SunREIT’s revenue and distributable income in the financial year ended June 30, 2011 are expected to be RM329.5 million and RM180.2 million respectively. Most analysts opine that the valuation is quite conservative given that revenue for the first eight months ended Feb 28, 2010, totalled RM281.8 million.
“If we were to annualise this figure and adjust for seasonal fluctuations, revenue for FY10 would probably come in at around RM400 million to RM420 million — well above the forecast of RM329.5 million for FY11,” said Asia Analytica Sdn Bhd.
For CMMT, which will list on July 16, distributable income for FY10 and FY11 ending Dec 31 are expected at RM64.7 million and RM101.3 million respectively on revenue of RM134.6 million and RM211.3 million.
Income distribution per unit is estimated at 7.16 sen and 7.45 sen for the first two years, representing yields of 6.6% and 6.9% respectively, based on the retail offer price of RM1.08 per unit.
SunREIT is aiming to raise RM1.5 billion in Southeast Asia’s largest IPO so far this year. It has an approved fund size of 2.78 billion units comprising an institutional and selected investors’ portion of 1.52 billion units and a retail portion of 134 million units.
The units were priced at 90 sen each for institutional investors, the low end of the 90 sen to 98 sen range marketed to investors during its book-building exercise. This means retail investors will be paying 88 sen per unit or two sen discount to the institutional price.
According to an announcement to Bursa, SunREIT’s retail portion has a subscription rate of 1.01 times.
CMMT is looking at raising RM995 million with a smaller offering totalling 768.5 million units comprising 719 million for institutional investors, 45.5 million for eligible directors and employees and just 22 million for retail investors. The retail units are priced at RM1.08 at the close of retail offering on July 5.
“The timing of the listing seems to favour SunREIT at the moment, as both are competing for the same pool of retail investors. Sunway is better known among local retail investors but CapitaMall has a stronger financial backing.
“At the end of the day, investors will be looking at the yield offered by the competing REITs, as these counters are purely defensive play and unitholders do not expect to have capital gains in the first two years of listing,” said an analyst from a local research house.
Institutional interest, however, remains buoyant with SunREIT having secured four cornerstone investors so far, namely the Employees Provident Fund (EPF), Permodalan Nasional Bhd, Government of Singapore Investment Corp and Great Eastern Life Assurance (M) Bhd, which took up a combined 376 million units or about 22.7% of the institutional units on offer.
CMMT has also secured a number of cornerstone investors, including the EPF and Great Eastern, which have collectively taken up 90 million of the institutional portion at RM1.10 per unit. It also has good response from other institutional funds.
Subscription for the retail portion closed on July 5. It is not clear whether the retail portion has been fully subscribed given the timing of its IPO, so close to SunREIT’s.
CMMT is a pure retail play while 70% of SunREIT’s income is derived from its retail properties. In terms of liquidity, CMMT is more liquid with estimated free float at 67% compared to 48% for SunREIT.
For SunREIT, eight properties with an appraised value of RM3.7 billion would be injected into the REIT, including Sunway Pyramid and Sunway Carnival Shopping Mall, SunCity Ipoh Hypermarket, Sunway Resort Hotel and Spa, Pyramid Tower Hotel and other smaller office properties.
CMMT has three shopping malls under its management, namely Sungei Wang Plaza, The Mines Shopping Centre in Sri Kembangan and Gurney Plaza in Penang with a combined value of RM2.1 billion.
This article appeared in The Edge Financial Daily, July 8, 2010.
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