Another factor is the large Fair Value Adjustments reported as profit in their Income Statement. While the SC guidelines require such adjustments, I’m a bit sad that REITs and property companies (such as KLCC Holdings) are required to take it to P&L. It should really be kept in the Asset Revaluation Reserve and distributions paid only if it is realized. See my earlier article: http://www.horizon.my/2008/11/klcc-property-fair-value-adjustment/

But having said that AXREIT unit price has almost halved in 2008. And it is one of the larger REITs which should give it more liquidity.

Atrium REIT’s portfolio looks quite focused. I like the fact that it is focused on a specific sector (industrial/commercial) but it would be good if there are more properties in there. A single tenant exiting could have dramatic impact on it. Also I believe the proposed acquisition was rejected because it was a related party transaction. Overall it’s OK for a yield play but do diversify into other things too.

Overall the Malaysian REIT industry is still far from maturity and lacks depth and expertise. Furthermore our REITs lack trophy properties unlike US and Australia where the best shopping malls and office buildings go into their REITs. The mentality here is to flick unwanted stuff into REITs and make a fast buck. It will take time for the market to grow and become an asset class. For now, a better bet would be beaten down large-cap stocks with consistent dividends.