Fundamental analysis for Sunreit

Due to the uncertainty provided by the local and foreign environment, defensive stocks like reits is recommended as they provide good dividend yield (which higher than FD in bank) while searching for opportunities to invest undervalued stocks.

Reasons for analysing Sunreit

1. Acquisition of the Sunway Putra Place will be expected to give a higher rental income for the company.
2. Sunway Pyramid 3 will be expected to benefit Sunreit.
3. Proposed MRT will be expected to benefit Sunreit. 

By looking at the P/E ratio, Sunreit has a ratio of 5.86 (as at 3 Jan 2012) which is the lowest among all the listings reit counters in Malaysia. After read through the newest report of Sunreit, the low P/E ratio is mainly due to the high unrealized gains of the company which higher than the 2 retail reits players (Hektar and CMMT). I believed that the high unrealized gains will be sustainable even though with a lower growth rate as the newly first quarter report ended 30 September 2011  recorded a higher rental income (rental income is the base for sustainable growth for property prices).

The vertical analysis has shown a normal distribution among all the components available in statement of financial position as compared to (Hektar and CMMT).

Vertical analysis for Sunreit	2011 (000)	Ratio
Assets
Non-current assets
Plant and equipment	122	2.78595E-05
Investment properties	4,379,000	0.999972141
Investment in a subsidiary
	4,379,122	1
Current assets
Trade receivables	9,393	0.127323004
Other receivables	5,068	0.06869722
Amount due from a subsidiary
Cash and bank balances	58,606	0.794409879
Derivative financial instruments	706	0.009569897
	73,773	1
Total assets	4,452,895
Equity and liabilities
Unitholders’ funds
Unitholders’ capital	2,350,437	0.848211689
Distributable income	420,613	0.151788311
	2,771,050	1
Non-current liabilities
Borrowings	1,502,025	0.966520468
Long term liabilities	52,029	0.033479532
	1,554,054	1
Current liabilities
Trade payables	815	0.006377601
Other payables	67,626	0.529192197
Borrowings	59,350	0.464430202
	127,791	1
Below are ratio analysis among the retail reits counters	4,452,895

	Sunreit	CMMT	Hektar
Income statement ratio analysis
Net property income/Gross revenue	0.7453	0.6956	0.609
Net investment income/Gross revenue	1.9291	1.5652	0.6221
Profit for the period/Gross revenue	1.691	1.156	0.4312
ROE (ratio) before adjustment	0.2356	0.0825	0.1194
ROTA (ratio) before adjustment	0.1243	0.048	0.05
Realised income (ratio)	0.3022	0.2564	0.9742
Unrealised income (ratio)	0.6978	0.7436	0.0258
Balance sheet ratio analysis
Current ratio	0.5773	1.7972	0.13
Debt to equity ratio	0.6069	0.5877	0.8565
NAV per unit (according to lastest report)	1.014	1.0333	1.32
Market ratio
P/E ratio	5.8624(price=1.21)	17.78(price=1.44)	10.78(price=1.32)
Dividend Yield	5.438(price=1.21)	4.674(price=1.44)	7.803(price=1.32)

From the income statement ratio analysis, sunreit has shown a better result as compared to Hektar and CMMT because I seen it has a better profitability efficiency (in my opinion). 

From balance sheet ratio analysis, sunreit's current and debt to equity ratio lies between ratio figures of Hektar and CMMT. I look this as appropriate as the the ratio figures of Hektar and CMMT are in the extreme. However, Hektar has a better NAV per unit as compared to Sunreit and CMMT.

From market ratio, Sunreit has a better P/E ratio while Hektar has a better dividend yield.

Analysis of unitholdings

Sunway City Berhad (36.72%) , EPF (8.85%), Government of Singapore Investment Corporation Pte Ltd (4.99%) and AmanahRaya Trustees Berhad (5.87%) are the major shareholders of the company.

Overall, I interpret Sunreit has a good fundamental background and good growth opportunities in the future. 

(Note: This post does not contain a buy or sell order. Any information disclosed above might contain mistakes and any losses incurred from using the information above I will not be liable.)

Market outlook for 2012

1. Volatility and uncertain as 2011 due to lack of clear measures and resolutions for the debt Eurozone crisis and also the US debt deficit problem. There is high possibility of major developed economies will slowdown.
2. Countries like Malaysia as an emerging market which relies greatly on exports expected a slower export and growth.
3. Singapore Stock Exchange (SGX) will be linking up with other South East Asian neighbours Bursa Malaysia and Stock Exchange of Thailand (SET) in 2012. Might attract more foreign funds into Malaysia market. Overlooked stocks might be brought to fair value in ease in the future.
4. General election(GE) might results in withdrawal of funds by the foreign funds due to the uncertainty provided by the GE. KLCI index is expected to drop below 1500 points before GE as the breakout for 1500 during the last week of 2011 might be due to window dressing.
5. Defensive stocks like healthcare and reits are recommended. 

Happy investing!

My Investment Logic, Approaches and Belief

Investment is an art. Different investment methods are used by investors and traders in the market and somehow there is no such method as a holy grail. But one thing among them are the same, they are here to earn.

For me, investment is almost the same as conducting your own business. I am a support of long term investment strategies. Careful analysis on internal factors (such as business model, competitive advantages, human resources and so on) and external factors (such as competitors, industry of the business,  health of a country) , believing own strategies and be patient for the return . If you follows my blog, you will notice that my analysis inside here is mainly based on the top down approach.

Firstly, Macroanalysis. Start from analysing global environment (Focuses more on constantly update myself with news and apply logic thinking to them) to Malaysia environment ( Focuses more on news update, FBMKLCI technical analysis, and MSCI Malaysia Index Fund analysis). Because of limited resources in term of money, time and knowledge, I am only focusing on Malaysia environment currently.

Secondly, Microanalysis. Start from analysing industry ( New updates about the industry and industry index technical analysis)  to particular company (New updates about the company, fundamental analysis and technical analysis). Both of these, I will be focusing in finding the growth potential of that particular industry and company in it (Normally in a 5 years perspectives).

From various kind of technical analysis available, below are few indicators which I am currently using:

1)Volume spread analysis (focuses in interpreting price spread and volume changes, always in use)

2)EMA(s) (for interpreting trend, always in use)

3)MACD (as a confirmation for volume spread analysis, always in use)

4)OBV (as a confirmation for volume spread analysis, rarely use unless the 1-3 indicators can give me a clear picture)

5)Chart pattern (always in use)

6)Psychological support and resistance (always in use)

For fundamental analysis (normally analysis will be the newest 3 years statements), there will be few part I will be heavily focusing in, below are some of them:

1)Chairman statements (to identify the trustworthiness of the company from the promises in the past)

2)BOD of the company

3)Statements of company(mainly vertical and ratio analysis)

4)Changes of shareholding

5)List of properties(mainly on property and reits company)

That's briefly my ways in investing. 

Happy investing, all! =)