Last week, I updated an article about the top 10 Singapore REITs that would have made you money if you invested from their IPOs. Out of the 20 S-REITs that have been listed for at least 10 years, 18 of them gave a positive overall return for investors.
In this article we are going to measure the performance of REITs that are listed in Malaysia. Since the pandemic in 2020, REITs in Malaysia have performed poorly. The underperformance is mainly due to the fact that the majority of listed REITs in Malaysia is made up of retail and office REITs which were badly affected by pandemic.
This may sound like a bad time to consider Malaysian REITs. However, short-term price fluctuations are not an accurate representation of a REIT’s quality. Its long-term performance, driven by its underlying fundamentals, is a better gauge.
So in this article, we will measure the performance of REITs that have listing history of at least 10 years. In total, there are 15 M-REITs that listed in 2013 or earlier. For example, this year’s new entry is KLCC Property as it now has a listing history of 10 years, and AME REIT is not included as it only listed in 2022.
We will make a similar assumption that Sophia (a fictional character) invests RM1,000 in each of these REITs from the day it listed. Since Sophia is a hard-core income investor, she doesn’t want to come out with additional money to subscribe to any rights issuances (if any) and is prepared for any share dilution. Let’s also assume that she neglects to sell her nil-paid rights from which she can make a profit from.
For example, if Sophia invested in Sunway REIT from its IPO in 2006, her initial investment of RM1,000 would have grown to RM1,700 (+70% in capital gains) as of 11 Jan 2023. On top of that, she would have collected total dividends of RM1,050 (105% in distributions).
From the table above, Sophia would’ve made a nice return in Sunway REIT as her initial investment of RM1,000 would have grown to RM2,740 including the dividends received over the years. If she invested RM10,000, then her investment would’ve grown to RM27,400. Basically, the more she invests, the more she makes. And the longer she holds onto the REIT, the more dividends she receives. All in all, her annualised return from Sunway REIT alone is 8.07% from 2010 to 2023. So after investing for more than 10 years, here are the top five best-performing Malaysian REITs for Sophia.
(Note: We’ve excluded brokerage costs, currency exchange gains/losses and taxes that might be applicable to foreign investors.)
5. IGB REIT (Annualized return: +6.19%)
Since 2012, every RM1,000 investment in IGB REIT would’ve turned into RM1,590. Including the dividends, every RM1,000 would cumulatively become RM1,820.
4. Atrium REIT (Annualized return: +6.50%)
Since 2005, every RM1,000 investment in Atrium REIT would’ve turned into RM1,430. Including the dividends, every RM1,000 would cumulatively become RM2,570.
3. Pavilion REIT (Annualized return: +7.09%)
Since 2011, every RM1,000 investment in PAVREIT would’ve turned into RM1,430. Including the dividends, every RM1,000 would cumulatively become RM2,260.
2. Sunway REIT (Annualized return: +7.71%)
Since 2010, every RM1,000 investment in SUNWAY REIT would’ve turned into RM1,560. Including the dividends, every RM1,000 would cumulatively become RM2,580.
1. Axis REIT (Annualized return: +10.74%
Since 2005, every RM1,000 investment in Axis REIT would’ve turned into RM2,980. Including the dividends, every RM1,000 would cumulatively become RM5,200.
In summary, here is Sophia’s overall performance:
As you can see, the Sophia’s M-REIT portfolio is a sea of green! M-REITs that have been listed for at least 10 years or more have given consistent dividends and positive overall returns if you invested from their IPOs.
However, do note that KLCC Property, YTL Hospitality, Hektar REIT, AmanahRaya REIT, Tower REIT, Capitaland Malaysia Mall Trust and AmFirst REIT are sitting on capital losses. But when we include dividends received over the years, their overall return is still positive. In fact, dividends accounted about 90.8% of the total return! So during a bear market like what we have seen in the last three years, dividends would serve as a cushion for the fall. And when the bull market returns, capital gains will boost the overall return.
Singaporeans and foreign investors who are not comfortable with forex risk are unlikely to be interested in M-REITs as the ringgit continues to weaken over the long run. However, Malaysians are unaffected by this as M-REITs are traded in their home currency. So if you’re a Malaysian, M-REITs are still a viable option to build consistent streams of passive income.
Just a quick reminder: 2023 applications for Dividend Machines are open until Sunday, 26 Feb 2023, at 23:59 hours. If you’re looking for a way to learn how to invest in dividend stocks and REITs and build multiple streams of passive dividend income, then we urge to check out Dividend Machines before it closes. Once the deadline has passed, Dividend Machines will only reopen in 2024. So if you miss this round, you’ll have to wait 12 months (or more) before we accept new members again.
Happy investing and we hope to see you on the inside! 🙂