Top Malaysian REITs to Invest in
REITs, popularly known as real estate investment trusts, represent one investment instrument you would want to look at if you are looking for new opportunities or if you are a beginner who wants to get started with his investment career. REITs are not new instruments for investors, but the trend is certainly new in Malaysia. However, we are talking about a developing market that can be appealing to investors. But before we get into the tips on investing in Malaysia’s REITs market, you may ask what these real estate investment trusts really are?
REITs are based on the same principle of traditional real estate investing, but the difference is you will not own a real estate property and collect income from tenants, but you have the possibility to invest in shares of available properties owned by REIT. In exchange, you will get a profit out of your shares, depending on how well the properties are performing.
In Malaysia, there are numerous types of REITs, such as office REITs, industrial REITs, hotel REITs or retail REITs. For example, shopping malls like Midvalley, Gurney Plaza or Sunway Pyramid are managed or owned by REITs that collect income from tenants in the form of rental. When you own a unit of REITs you actually have a share of the property managed or owned by the REIT.
A quick look at the rules that govern REITs
Now that REITs are clearer to you, what it means is to invest in REITs in Malaysia? Before you check out the Malaysian Bursa, you should get informed on the regulations about REITs in Malaysia. In Malaysia, as in many other countries where REITs operate, there are certain rules in place that are meant to protect investors. For example:
- REITs are safe investments, so these trusts are not allowed to borrow up more than 50% without further approval from unitholders.
- REITs are exempted from income tax with one condition – they need to distribute 9% or more of the taxable income to the unitholder. This translates into higher dividends for investors, which makes REITs one of the best choices if you are looking to invest in Malaysia.
Why invest in REITs?
There are many good reasons why you should park your money in a safe sector like that of REITs. If you are not convinced just yet or if you want to balance the positive and negatives, we have a list with top reasons why you should invest in REITs:
- Affordability – REITs investments cost less than traditional real estate investments
- Liquidity – one of the best reasons to invest in REITs is that you can easily exchange REITs on the stock exchange (Bursa stock market in Malaysia) if you need liquidity. This is not true when investing in traditional real estate properties
- Great dividend yield – dividends in REITs are great thanks to the favourable regulations on the Malaysian market for investors. The sum you could actually get from your investments is similar to the rental income you would get if you owned your own property.
- Diversification – the greatest thing when investing in REITs is that you get to test a diversified market and can invest your money in different types of properties. This way, you will see which one works better and test out different sectors. It is a lower risk practice than putting your money all in one place.
- Professional management – instead of having to deal with the hassle of managing a property yourself, with REITs you leave that to someone else as a professional management team is there to handle things for you while you can focus on future investments.
Malaysia’s top 8 REITs to invest in
All that being said, which are some of the top REITs in Malaysia to invest in now? With a growing market, there are as many options as investors. However, we recommend the top 8 REITs to invest in Malaysia as mentioned below:
1. Hong Leong Bank
Hon Leong Bank is very popular among REITs investors as its earnings grew more than expected this year. In 2018, Hong Leong Bank is one of the best choices for you if you are looking for REITs in this sector.
Another bank that is a good REITs investment, Maybank has both banking business in Islam (Maybank Islamic) and insurance business (Etiqua Insurance). Maybank is also the largest bank in Malaysia which gives credit to investors. Plus, with a six percent dividend yield, Maybank could be your best choice if you are looking to invest in banking REITs.
3. Wah Seong
Wah Seong is known as a force on the Malaysian market as it has operating facilities in 18 different countries and is still looking to grow its customer base. Wah Seong runs business operations in Europe, China, Southeast Asia, India, Canada, Australia, East Asia, the Middle East, Canada, Latin America, and Africa. These two assets alone make it a good REIT option for investors.
4. Yong Tai
Yong Tai is one top pick for the property sector in Malaysia. Plus, the REIT is popular in the tourism sector as well. Definitely, it’s a good investment opportunity to look at.
5. SKP Resources
SKP Resources has great potential and positive earnings. Plus, with key clients that predict growth for the REIT, this can be considered an investment opportunity for beginner investors.
6. Bumi Armada
Bumi Armada has great earnings that provide good dividends for investors. This year the prospects for the REITs look good, with an increased global interest in the production of vessels. Take a look at this REIT if you are looking to invest.
Hibiscus is a great option in the oil and gas exploration and production sector. With this in mind and the fact that it has closed some opportunistic acquisitions recently, this REIT is expected to bring in some great income for investors.
CIMB is on the rise, with good news on non-interest and net income and the specialists say it is in a good position for recovery. You may want to look at it if you are interested in Malaysian REITs.
So, if you are getting convinced now, choose one of the top 8 REITs in Malaysia for 2018 and start investing today!