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5 Things I Learned About REITs in Malaysia (From a Bursa Malaysia-Sponsored Workshop)

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Back in April 2017, I attended a full-day REITs Analysis Workshop organised by Bursa Malaysia. It was part of the Bursa Investor Education Workshop Series where they talk about different investment vehicles and investment strategies.

Here are 5 things I learned about REITs in Malaysia from the workshop that I want to share with you, plus additional info I learned along the way.

#1 – REITs investment in Malaysia: What you should know

REITs stands for Real Estate Investment Trust. The investment allows retail investors, aka you to profit from commercial properties’ rental income.

Commercial properties comes in a few types, including:

  • Office;
  • Industrial;
  • Retail;
  • Hotel;
  • Mixed (combination of the above, may also include Hospital, Education, Business Space and Plantation)

Each REIT is managed by a Trust, ie a bunch of people who make big decisions for the REIT. Multiple properties managed by the same Trust is common.

As mentioned, REIT investors earn from rental income, which comes from:

  • Retail shops at malls (from H&M to Guardian);
  • Office lots at office buildings;
  • Medical, logistical, industrial and educational institutions at whole buildings;
  • Hotels at hotel buildings;
  • and more, as long as they are commercial (not residential) properties.

#2 – Where and how to buy REITs in Malaysia?

You can buy REITs in Malaysia from:

  1. Bursa Malaysia – Local REITs
  2. Roboadvisors – Local and international REITs, and
  3. Online Investment platforms – Local and international REITs

Note: Local REITs means the real estate assets are located in Malaysia. International REITs means the real estate assets are located outside of Malaysia

Here’s how to buy in REITs from each option.

1) How to buy REITs listed in Bursa Malaysia

Here’s the step-by-step way to buy Local REITs listed in Bursa Malaysia:

  • Open a CDS account (Skip this if you already have one)(Here is a list of organisations you can open a CDS account from)
  • Fund your account
  • Select which REITs you’d like to invest in and take note of the price per unit
  • Purchase 100 units (or the minimum amount allowed). For example, let’s say 1 unit is RM1, so 100 units is RM100.
  • Congrats, you have invested in the REIT ๐Ÿ™‚ Repeat the purchase next month, or consistently

There are 20 REITs listed in Bursa Malaysia.

*Note: There are 20 REITs listed in Bursa Malaysia, but only 4 are Syariah-compliant. They are:

  • Al-โ€˜Aqar Healthcare REIT
  • Axis REIT
  • KLCC REIT
  • Al-Salam REIT

2) How to buy REITs from Investment Apps

You can buy Local and international REITs from 2 investment apps:

  • Wahed Invest (roboadvisor) – offers Syariah-compliant Local REITs,
  • Versa Asia‘s Versa REITs (‘digital wealth management app’) – gives you exposure to real estate assets in Singapore, Hong Kong, Malaysia and United States

Here’s how to buy REITs from both platforms.

How to buy Local REITs from Wahed Invest

Here’s the step-by-step process to buy Local REITs from Wahed Invest:

  • Open Wahed Invest account (Obligatory referral code: Download app and use code ‘surbin1’ to get FREE RM10 bonus)
  • Select Thematic > Local REITs (If you already have existing investment, click Add account in Dashboard)
  • Cash in (fund your account) a minimum of RM100 and complete your purchase
  • Congrats, you have invested in the REIT ๐Ÿ™‚ Repeat the purchase next month, or consistently

How to buy Versa REITs from Versa Asia

Here’s the step-by-step process to buy Versa REITs from Versa Asia:

  • Open Versa Asia account (Obligatory referral code: use code ‘SURAYA’ or click here to get FREE RM10 when you deposit RM100 in your account)
  • Select Investments > Versa REITs
  • Cash in (fund your account) a minimum of RM100 and complete your purchase
  • Congrats, you have invested in the REIT ๐Ÿ™‚ Repeat the purchase next month, or consistently

Versa REITs gives you exposure to real estate assets in Singapore, Hong Kong, Malaysia and United States.

3) How to buy REITs from Online Investment platforms

Aside from CDS Account and through roboadvisors, you can also buy Local and International REITs from online investment platforms. For example, you can:

Aside from those two, there may be other online investment platforms you can get Local and International REITs from. Let me know what I missed in the comments.

#3 – Which is the best REITs in Malaysia?

Naturally, the next question you as an investor want to know is, which is the best REITs in Malaysia? Which one(s) should you invest in?

Using simplified fundamental analysis approach, the speaker focused on three things:

  • Dividend Yield – did the REIT yield steady or growing returns in previous years? If yes, that’s a good indicator.
  • Growth Potential – will the rental demand for the properties increase or decrease in 5 years?
  • Loan Related Risk – is the REIT in a financially stable position? Whatever is their asset value, they must have less than 45% in debt. For example, if they manage RM100 million worth of properties, the debt must be less than 45 million. They also must have good interest coverage ratio (more than 3 is good; this part I’m still struggling to calculate).

Personally, I think that Dividend Yield and Growth Potential parts were easy enough to understand. It’s just looking at one chart then do the market forces assessment.

On the other hand, the Loan Related Risk part requires you to read the REITs’ balance sheets and calculate the debt to asset ratio and interest coverage ratio.

Hot tip: Finding the best REITs in Malaysia based on Dividend Yield

You may not know this, but Local REITs or Bursa-listed REITs have pretty good performance.

Look at the Yield section in the picture below, taken from The Edge notice how none of the REITs have negative returns in the last 3 years? This is indication (but not guarantee) of continuing good performance.

You can see historical REITs dividend yield beyond the 3 years at klsescreener.com or TradingView.com.

#4 – REITs from fundamental analysis approach – what’s that?

reits in malaysia
Agenda of the day

I really liked the fact that the speaker took the time to explain fundamental analysis versus technical analysis. Both can be used when making your choice.

In case this is your first time hearing about fundamental and technical analysis, here’s the difference between both:

  • Fundamental analysis (FA): assess factors that make an investment good or bad; suitable for long-term investing. “I think the property will continue to attract renters and yield a steady passive income because of its proximity to an expanding university.”
  • Technical analysis (TA): the type of investment doesn’t matter, the profit potential based on charts does; mainly for short-term trading. “Based on indicators, there is a strong likelihood that the market will correct itself and the price will decrease therefore I will short X”.

REITs in Malaysia: Pick Fundamental or Technical Analysis?

Chua said that both FA and TA approach can work, but pick a primary approach because using both can sometimes give you contradicting results and get you stuck in analysis paralysis.

My personal preference (as well as the speaker) for REITs is fundamental analysis. If one were to take the FA approach for REITs, the speaker emphasised market forces, like:

  • Because e-commerce is growing, REITs that concentrate on retail (ie shopping malls) may lose tenants as they can’t compete with online shops;
  • Likewise e-commerce is likely to help push REITs that include logistics industry;
  • Booming tourism means that REITs in the hospitality/tourism sector have a good chance of doing well;
  • REITs that includes medical industry might do well as Malaysia is set to be an ageing population by 2030;
  • And more.

The analysis above are examples, there are more things to take into consideration. There is no one correct answer. They can even be personal opinions, but you get the gist.

Additionally, according to Chua, it’s quite easy to see good-performing REITs in action – go to any of the managed properties and see the tenant occupancy rate.ย If there are a lot of shops (more than 80% filled) and many people at the building, that’s a good sign.

The bottom line is – if you think the properties is managed properly (good maintenance, etc) and can attract tenants, it has potential. Think from the tenant’s POV – would I rent here if I have a shop/office? If no, avoid.

#5 – Additional information about REITs in Malaysia

  • Bursa Marketplace – Go toย The Mkt > REITs – Lists all available REITs in Malaysia. Click on each one for more info.
  • You can also learn about REITs from Bursa Academy webinars
  • The Complete Guide to REITs in Malaysia by Dividend Magic
  • As mentioned, you need a CDS account to buy REITs. You can find more information about CDS accounts here.
  • The REITs’ individual websites – Google their names and their websites should pop up. The website should contain reports, types of properties they manage, the people behind the trust, and more.

Conclusion

REITs is like the stocks version of properties, bundled up in package like unit trust and managed by professionals. So if you like the idea of property investment but lazy to manage it yourself, REITs might be a good option for you.

Lastly:ย My knowledge on REITs in Malaysia is by no means complete, so I invite you to share your knowledge in the comments section below.


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20 Comments

  1. Hi Suraya!

    I’ve yet to dip my toes into the investment pool, but I’m really interested to begin with REITs. Glad to come across your article here because I’ve been doing some research into REITs and think they’re a pretty good investment choice, especially for beginners.

    I’ve blogged about some things I’ve learned from reading up on Malaysian REITs, maybe somebody else here will find it useful too ^^ (Link in name since the comment doesn’t seem to allow URLs)

  2. Hey Suraya – Another great post. “My knowledge on REITs in Malaysia is by no means complete,” but you won’t know the value you brought to a complete newbie like me! Thank you ๐Ÿ™‚

  3. With the Fed Res going to have at least twice rate increase this year, REIT with high debts may not be good.

    1. Hi Fred,

      You’re completely right. The speaker told us to re-consider any REITs that has 45% or more in debt.

  4. Thanks for sharing Suraya.

    I went to some of Bursa IEWs last year and had a session with Chua as well. It was about FA for beginner.One of the best session I attended (fyi, I had 0 knowledge about investment until last year).

    Just wondering… do you plan to share anything from the Bloktex conference? I just got interested in blockchain but was too late to know about the conference. Hope they’ll have it again next year.

    1. You’re welcome, Karima ๐Ÿ™‚

      Re: blockchain and Bloktex conference. I’m pleasantly surprised by the demand for more information. They do plan to hold it annually, so you’ll get your chance next year. I might do a post on blockchain then ๐Ÿ™‚

  5. For bumiputra, if you’re a bit sceptical or have not enough courage to dip your toes into stocks, you can consider investing in Amanah Hartanah Berhad (shariah compliant). Instead of handpicking REIT stocks by your own, you got a fund manager to make the decisions. Just like how ASB, unit trust funds work.

    Just to add onto the plausible REITs investment vehicles. ๐Ÿ™‚

  6. Hi Suraya,

    Great write-up! I started Malaysia REITs back at 2014 and the performance/yield is as per my expectation.

    But however higher yield across the region tempted me to migrate my portfolio to Singapore REITs recently. Perhaps, you can check them out.

    USP: Get paid in SGD dividends. ๐Ÿ˜‰

      1. Yes you do. But there is a way to open a SG bank account without work permit or even travel to SG! ๐Ÿ˜‰

        http://www.maybank2u.com.my/WebBank/iSAVvyMyForm_031011.pdf

        This SG account opening can’t be found at Maybank MY opening accounts page. It’s somehow hidden and you need to specifically mention S$ iSAVvy Savings Account Application Form for the teller to guide you on the opening process. I did mine at MBB Bandar Utama branch.

        After you’ve opened this SG bank acc, next is to open a SG brokerage. I would recommend MBB Kim Eng SG cause less headache to control different bank accounts. MBB SG bank account, MBB KE brokerage.

        And proceed to buy SReits. ๐Ÿ˜€

          1. You’re welcome.

            But just gonna let you know to do it asap… Cause after the 1MBD issue, SG are pretty careful with MY applications and MIGHT close this account opening method in the near future. No one knows when.

        1. Many local brokers in Malaysia also enable trading of foreign stocks in exchanges like SGX, NYSE, NASDAQ, HKSE. You can fund your Malaysian brokerage account using Malaysian bank accounts to trade selected foreign stocks. The catch is the cost, i.e. higher brokerage and recurrence data or platform fees. Only good for frequent traders/investors.

  7. Hi,

    Interesting Article, Can I know what would the best starting amount to invest on REITs.

    Can we know what other charges that we have to consider when investing in REITs ?
    It was noted that opening a CDS account costs RM10, how about additional charges by Brokers, can we know details on the charges and how to calculate the charges and how much of percentage our investment has to do before breaking even from the costs and charges ?
    How would it be if we like to take out our REIT investment later on
    Do REITs have cyclic periods , periods of low and high ? and when would be the best time to buy them ?

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