For those who follow my blog, I like to invest for productivity asset instead of invest on hopes that the price of asset changes (or we call it capital gain). Base on this basis, I like to invest into stocks that will give consistent dividend, especially REITs. Recently, I just learned that, even though we invested into Reits, it doesn't means that we can just let the management do their job and we just ignore and do nothing.
AmanahRaya Reit (5127, Arreit) is one of my top three investment in Reits portfolio. Three of them, namely, Amfirst, YTLreit and Arreit used to give dividend more or less the same for past few year. However, since the beginning of 2014, Arreit dividend was in the decrease mode. Why? There are few reason contribute to this down trend, though I have known these problem as earlier as last year, but I do nothing, as I believed the management team will take action to overcome the problem, it prove I am totally wrong today. =.=
Last year, CIMB moved from Samantan to Sentra. This caused Arreit lost a tenant at Wisma Amanah Raya Samantan. Then I thought the management will do something, at least go and find new tenant or dispose the building, but till today, the building is unoccupied.
Then came a second incident, High-5 (7136) was in big financial problem, somehow with liability of about 450 million. Bursa had announced going to delist High-5 at 10 Sep 2014 if they fail to submit the re-structure plan. Seem High-5 in deep shit now and how they going to turnaround is still a big question mark! Why
is this related to Arreit? Because High-5 is one of the tenant which contribute about 10% of Arreit's revenue. In fact, the rental was defaulted for few months already, that's why in the last few quarter come out as "impairment receivable" of nearly RM1.9 million. Again, we fail to see any action being taken.
I still remember the Arreit management raised the management fee from 0.60% to 0.75% at 2013, but the end result one year later is really below passing mark. One need to remember, the management fee was base on the Net Asset Value, which revalue every year and management get increase in salary, but share holder feel the pain as the rental income now went to their salary cost. For other Reit company, this may not be a problem, if the management able to raise the source of income higher then their management fee.
That's why I want to urge those who want to invest in Reits, keep this is mind before investing. If looking for dividend income, we should accessing the level of sustainability of Reit income. And now, if you want to invest in Arreit, think twice before take action, or at least let them settle these problem first, if not, I will guarantee you, the stock price will become lower in next quarter. (today the price is 89 cents)