How to research for quality Malaysia REITs? My top 5 steps, revealed! (via moomoo app)

Last Updated on September 20, 2024 by Chin Yi Xuan

Real Estate Investment Trusts (REITs) are companies that own income-producing real estates, such as shopping malls, offices, warehouses, and hospitals.

In Malaysia, publicly-listed REITs have been well-received among dividend investors thanks to REITs’ tendency to pay a competitive dividend yield:

As a dividend investor, Malaysia-listed Real Estate Investment Trusts (REITs), such as IGB REIT and Axis REIT make up an important portion of my Freedom Fund portfolio:

In this post, let me walk you through 5 key steps on how I use the handy features within the moomoo app to research for REIT!

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My 5-step approach to REIT research (via moomoo app)

Personally, if I were to start from zero, I’d generally start my research from a top-down approach with a few key questions:

• Entire sector: How is the REIT sector doing compared to other sectors?

• Within the sector: Which REIT is the top-performing Malaysia REIT?

• REIT vs REIT: How is a particular REIT doing compared to another?

• Individual REIT study: How good/bad are the fundamentals of the REIT?

• Is a REIT overvalued/fairly valued/undervalued?

For that, I find the suite of features within the moomoo app very handy in my research.

Moomoo MY offers beginner-friendly stock research tools

The features & tools on the moomoo app are also very beginner-friendly, as there are easy-to-understand explanations for the financial terms & indicators in the app:

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Step 1: How is the REIT sector doing compared to other sectors?

**Before we start, it is important to note that the tools & features that I show below can be used for stocks from other sectors as well.**

To begin, open the moomoo app, select ‘Markets’ and select ‘MY’ which indicates the Malaysia stock market:

Feature #1: Heat Map

With the Heat Map feature in the moomoo app, I can see how, as a whole, the REIT sector performs relative to stocks from other sectors in Malaysia.

• Step i: Select Heat Map, and change the view to list view.

• Step ii: Under ‘Filter’, select ‘YTD’ which will show us the Year-to-Date performances of each sector:

• Step iii: Sort the performance from highest to lowest:

From this, we can see that the entire REIT sector has been showing a positive Year-to-Date (YTD) performance of 11.62% in 2024:

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Step 2: Which REIT is the top-performing REIT?

Next, I’d also like to find out which REIT is the top-performing REIT Year-to-Date.

Feature #2: Compilation of stocks within the same sector

To do so, select ‘Real Estate Investment Trusts’ from the Heat Map:

• Sort ‘YTD’ from largest to lowest to view the best-performing REIT year-to-date (YTD).

As of the time of writing this article (Sept 2024), REITs like Pavilion REIT (+26.58%), and IGB REIT (+24.64%) have been outperforming the return of the entire REIT sector (11.62%) year-to-date.

• Sort ‘Market Cap’ from largest to lowest to view the largest REIT by market capitalization.

Generally, companies with a larger market cap tend to be more established relative to companies with a smaller market cap.

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Step 3: REIT vs REIT: How is a particular REIT compared to another?

Want to compare which REIT is better in terms of their dividend yield, and other fundamentals like Earnings Per Share (EPS) and Net Margin?

‘Compare’ is a powerful feature in the moomoo app that allows me to compare up to 7 stocks side-by-side.

Under ‘Compare’, I can have all important insights of multiple companies at a glance, such as Dividend Yield, financial indicators, and valuation indicators.

Feature #3: Side-by-side stock comparison

• Step i: Start by selecting a REIT that you’d like to compare. For this demonstration, I’ll be selecting IGB REIT.

• Step ii: Select the 3-dot button at the bottom right to activate the expanded menu. Next, select ‘Compare’.

• Step iii: Use the ‘+’ icon to add up to 6 other REITs for comparison. For this example, I’ll add Pavilion REIT (PAVREIT) and Atrium REIT.

We can get many important insights from the ‘Compare’ feature. Some key insights that I look for include:

• Price trend comparison over different timeframe (1/3/6-month, 1 & 3-year, and YTD performances)

With this, I can compare the performance of all 3 REITs from a shorter time frame, or even for the past few years.

From a 3-year price trend timeframe, IGB REIT is the top performer among all 3 REITs.

• Dividend yield TTM (Trailing 12-month)

Dividend yield TTM indicates the dividend yield (%) after taking into account of the distribution for the past 12 months.

Atrium REIT comes out top in terms of yield (5.76%), follow by IGB REIT (5.17%) and PAVREIT (3.78%).

• Valuation indicators like Earning-Per-Share (EPS)

EPS measures a company’s profitability per unit of the company’s outstanding shares.

Generally, a high EPS indicates greater value because investors tend to pay more for a company’s shares if they think the company has higher profits relative to its share price.

IGB REIT comes top with the highest EPS among 3 REITs.

• Financial indicators like Return of Equity (ROE), Net Margin, Debt to Asset, Current Ratio

On it’s own, financial indicators may not mean much, but there are many insights that we can gather by comparing companies side-by-side.

• To start with, among 3 REITs, IGB REIT has the highest Return on Equity (ROE), which signals that IGB REIT uses its shareholder’s equity more efficiently to generate income.

• Next, IGB REIT also has the highest Net Margin, which means it is making the most in terms of net profit per dollar of revenue gained.

• IGB REIT also has lowest Debt to Asset, which indicates that only 26.66% of the assets own by IGB REIT is financed by debt, with the rest owned by shareholders.

• Finally, IGB REIT has the highest Current Ratio of 1.16. A current ratio 1.16 means that IGB REIT has 1.16x more in current assets (eg. cash, short-term receivables), which is enough (>1.0) to cover its short term liabilities (short-term debt).

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Step 4: Individual REIT study

In Step 3, we’ve compared REITs side-by-side. Let’s look at how we can use features within the moomoo app to conduct research on an individual REIT.

For this study, let’s use IGB REIT, which has displayed an overall competitive dividend yield and decent financial health in Step 3.

Feature #4: Stock insights within the moomoo app

Start by searching for IGB REIT in the moomoo app. Then, select ‘Company’

A few key insights that I’ll normally look at are:

• （1) Dividend payout consistency or Dividend growth

As a dividend investor, I prefer REITs with a consistent dividend payout, even better are those with a track record of growing their dividends.

With IGB REIT, it has raised its dividend per share (DPS) for the past 2 years since recovering from the pandemic in 2021:

• (2) Company overview

It is also important to know what does a company do while doing a research.

IGB REIT manages 2 retail malls in Klang Valley, namely Mid Valley Megamall and The Gardens Mall.

• (3) Financial strength

Finally, I like to dive into the financials of a REIT. For this, I sort the financials on an ‘Annual’ basis:

(i) EPS: IGB REIT has been showing strong earnings recovery after the pandemic, which is encouraging for a REIT managing retail malls.

(ii) Net margin: IGB REIT has also shown an increase in net margin post-pandemic, indicating rising profitability.

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Step 5: Is a REIT overvalued or undervalued?

To find out if a REIT is overvalued, fairly valued, or undervalued, I usually like to compare its share price to Net Asset Value (NAV) Per Unit:

• NAV Per Unit= (Total Asset – Total Liabilities)/Shares outstanding

In general:

• REIT share price > 3x NAV Per Unit = Overvalued
• REIT share price > NAV Per Unit, but <3x NAV Per Unit = Fairly valued
• REIT share price < NAV Per Unit = Undervalued

How to get NAV on moomoo app?

Let’s find out if IGB REIT is over or undervalued:

• Step (i): Find out the total shares for a REIT.

• Step (ii): Deduct Total Assets and Total Liabilities to get Net Asset

Using the latest quarter (Q2 2024) available as reference, IGB REIT has a total assets of RM5.5B and total liabilities of RM1.47B.

Hence, the latest Net Asset Value (NAV) of IGB REIT is RM4.03B.

• Step (iii): Calculate Net Asset Value (NAV) per unit

NAV Per Unit of IGB REIT = NAV/Shares outstanding = RM4.03B/3.61B = RM1.11/unit

As of 10/9/2024, IGB REIT’s share price is RM2.04. This makes the share price larger than IGB REIT’s NAV per unit of RM1.11 (Price > NAV Per Unit), BUT lower than 3x NAV Per Unit of RM3.33 (Price < 3x NAV Per Unit).

Hence, we can conclude that IGB REIT is currently fairly valued and we can make our investing decision accordingly.

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Quick Guide: How to buy your first stock via moomoo app

Looking to place your first stock, REIT, or ETF trade on the moomoo app?

Here’s a quick guide on how to place your trade:

• Step (i): Search for the stock that you’d like to buy, and select ‘Trade’.

• Step (ii): Choose the order type for your trade. The moomoo app has a suite of basic to advanced order types, alongside the explanation of how each works.

• Step (iii): Select your trade quantity.

• Step (iv): Review the amount needed for the trade. Ensure you have enough cash to place your trade under ‘Max Qty to Buy (Cash)’, or enough buying power if you trade on margin under ‘Max Qty to Buy (Margin)’.

• Step (v): Proceed to place your trade by clicking the ‘Buy’ button.

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Verdict: Make stock research a breeze with the powerful tools & features in the moomoo app!

Having used Moomoo MY since its launch in early 2024, I find the moomoo app to be one of the most feature-packed, yet user-friendly investing platform that I’ve used so far.

I hope this walkthrough of my REIT research showcase inspires you to explore the features in the moomoo app to improve your investment research process!

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Disclaimers:

All views expressed are the independent opinions of myself, which are not shared by Moomoo Securities Malaysia Sdn. Bhd. (“Moomoo MY”). No content shall be considered financial advice or recommendation. Moomoo MY links are included in this post, through which referrals are made and I may receive certain commissions. Please contact Moomoo MY for more information.