Friday, July 18, 2014

CMMT - switching within Reit counters

There are many method to "make" money in stock market, one of the way i like to use is call "changing horse", just see below how this method work.

First, let me introduce one stock, not very popular, but with good and consistent dividend in last 4 years. The company I mean here is Capital Malls Malaysia Trust (CMMT, 5180). I have been follow up closely the company's performance for the past 2 years (together with 2 other Reit stocks) but unable to decide the entry point. (at which level to buy)

CMMT is a reit stock, currently they have 4 main properties, namely, Gurney Plaza, Sungei Wang Plaza, The Mines and East Cost Mall. Overall, the occupancy rate is about 98%. Gurney Plaza is one of the place I like to visit on week end, one of the reason, the parking place is nice and safe. (at Penang, you can find many shopping malls, but many places are dirty and smelly) They are also in the midst of discussion, potentially add Queensbay Mall (another place I used to go too) into their porfolio.

CMMT just release their quarterly financial result, generally in line with local broker's expectation and they also announced to pay half year dividend of 4.53 cents per unit with ex-date on 29 Jul. (4.35 cents in 2013 same period) Most of the broker gave their target price around RM1.60 to RM1.70 (current price at RM1.47), to me, capital gain is just a bonus, I am more interested to know if they are able to sustain consistent dividend payment in future and I bet they will, base on their past performance result.
(latest presentation on 17 Jul 2014)

Malaysia center bank just increased the interest rate last week (OPR), generally, the cost for Reits may increase and this will translate to, slightly decrease of dividend pay out per unit. However, if you can find a team of management who had show the result of good job to create and grow value for retail investors (from the above 1st image), then the increase of interest rate will have a minimum impact to dividend payment.

So, what is "changing horse" mean and how this method work? One of the Reits stock in my portfolio was Alaqar (5116) which I invested few years back. From the capital gain itself, there was at least 50% gain with current market price, the only problem, the dividend for this company never grow in past few years, and this had trigger my intention to execute the plan of "change horse" since last year. Last week, I executed my plan by selling all the Alaqar (5116) at $1.38 and buy CMMT at $1.46. Since Alaqar just paid their dividend on Mar, the next payment would be around Sep. By switching to CMMT, I can enjoy their half yearly dividend on 29 Jul, which guarantee dividend of at extra 6%, compare to if sitting still with my original holding!