Currency
Risk
Major trust’s
revenue contributor – Australian properties (73% of FY2014 total revenue) are
facing tension in delivering revenue back to Malaysia as weakening Australian
Dollar (AUD) against Malaysian Ringgit (MYR) has lead revenue to shrink due to
weak mineral commodities price. Same position as to Japanese property as BOJ is
busying in printing money to achieve target inflation rate and target economic growth, leading Japanese Yen
(JPY) to shrink against world’s major currency including MYR. However, the expected
impact of weak AUD will ease in the second quarter of FY2015 with expected
stronger revenue due to holiday season and expected continuation of decreasing oil price will pressure on MYR performance in the comming months of 2015.
Financing
Risk
Financing the
purchase of Australian properties via debt during FY2013 has increased the
trust gearing ratio. With Malaysia Overnight Policy Rate (OPR) hikes and the
postpone of corporate exercise by the trust to CY 2015 in paring down the
gearing level will lead to a rise in financing cost. The expected finance cost rise
will further squeeze the trust’s income available for distribution to the
shareholder
Interest
Rate Risk
Recent rising Malaysian
Government Securities (MGS) yield due to weakening Ringgit and oil price slump
has lead the yield spread between the trust’s yield and bond’s yield to shrink,
making the REITs sector to lose it shine causing investors to shift their funds
into a safety shelter as compare to REIT.
Conclusion: The
postpone of the corporate exercise to drawn down the trust’s debt level will
continue to the trust’s dividend payout, causing the trust’s dividend yield is
expected to shrink. Thus, we recommend a hold which will be the best cause
under current rising volatility market condition.
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Disclaimer:
The information
in this article has been obtained from sources believed to be reliable. Its
accuracy or completeness is not guaranteed and opinions are subject to change
without notice. This article is for information only and not to be construed as
a solicitation for contracts. The blog’s owner accept no liability for any
direct or indirect loss arising from the use of this article.
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