KLCC REIT versus MAXIS (or PNB Unit Trust?)

I am back in a dilemma. I have just sold 50% of my SKPetro shares when it peaked at 3.59 last Thursday 9 May 2013 and now I want to plough back the profit into the market. I was looking at the Reits and noticed that most of their prices have kind of stabilised over the last six months.

Then came this old market player, albeit in a different package, KLCC Reit which was relisted last Thursday as well. The reference price was 7.25 and it went up to 7.70  before closing at 7.64 on Friday. It was a fine debut alright. The prospects look good with the intended inclusion of more high-end properties and the fact that its current properties are all fully-tenanted. Moreover the CEO indicated that they are going to distribute 90% of their annual profit as dividend which sound attractive. By 2015 it seems the dividend can go up to 35%. The name of Petronas, the National Petroleum Company as the backer of  this Reit is also comforting.

I am disappointed though that the price is very high. In fact the price of this Reit, the biggest of the lot in terms of capitalisation, sticks like a sore thumb. All the others except for AxReit (@3.82) are priced below 2.00. Looks like this Reit is for the wealthy to be wealthier as ordinary retail investor would be hard pressed trying to own it. It doesn't look good on this government-linked company (GLC) to deprive the small investors of the shares of the wealth. Though we must realise that the foreign fund managers would have snapped this Reit had the price been much lower. Still I believe the Malaysian investors would have loved to  possess this stock and ride with the company.

A  good dividend-paying stock

KLCC REIT- Currently  lower yield than MAXIS

Now back to my dilemma. Shall I purchase KLCC Reit or MAXIS? Let's do some simple calculation. If I were to get 30k KLCC Reit shares at the price of 7.52, I would have to come up with about 227k inclusive of transaction cost. If the annual dividend is at 35% then I would get 9k after subtracting the 10% tax. That would be a yield of 4.16%.

The last price of KLCC property was 7.25 before it was suspended to repackage it  into a Reit and so unless my evaluation is wrong, I don't think the Reit's unit price  is going to get any higher than 8.00 before the year ends. Even if it uptrends, the value would be slightly higher than  MAXIS FV of 7.20.

Now if I were instead to choose MAXIS and buy an additional  30k shares at the current price of  6.99 pre-dividend ex-date on 14 May, or better still wait for it to drop slightly post-dividend, say at 6.80 then I would have to fork out only 205k and at current MAXIS annual dividend rate of 40 sen TE, I would receive  12k a yield of  5.85%. The assumption here is both stocks are changing proportionately.

But if you were conservative and risk-averse, it is better to put your 205k in a PNB unit trust with the annual dividend of 6.5 sen because you would receive about 13K and tax-free but the unit price is fixed at 1.00 and  you will have to keep that amount for 12 months to get that dividend though the advantage is you also will  have that compounding principle to embellish your annual reinvestment. Slow and steady.

But  I think for the time being  I will pick up MAXIS shares instead of the highly-touted KLCC Reit  and give PNB Unit trust a miss as I fancy a roller coaster ride. In addition, to me, MAXIS is a good defensive stock with strong fundamentals and imbued with  innovative management and good governance.

I sure hope I am  going to celebrate this decision. Here I go on an adventure ride comes 15 May 2013.