Decent returns amid volatile market conditions
From a high of RM1.43 in March 2008, the unit price of Quill Capita Trust (Q-Capita) had tumbled to 90 sen as at Dec 26, not far off the price at which it had gone public in January 2007 — 84 sen.
Although the unit price has declined significantly, yield has increased on the back of rising dividend payments over the last two years.
Only 400 units of Q-Capita were transacted on Dec 26, and given such thin volume, it was traded at a wide bid-and-ask spread of between 81 and 90 sen. At this price range, the real estate investment trust (REIT) was trading at a forward gross dividend yield of between 9.3% and 8.4%. This translates to an attractive net dividend yield of 8.4% to 7.5%, after deducting a 10% withholding tax for individual investors.
The numbers were derived from management's dividend forecast of 7.53 sen per unit for FY2009 ending Dec 31. This is a 7.4% increase from FY2008's dividend of 7.01 sen per unit. The forecast was supposedly presented by management to Q-Capita investors in October 2008 when the US subprime mortgage woes worsened.
Notwithstanding the gloomy economic outlook, Q-Capita may deliver higher dividends in 2009, given its niche in purpose-built offices, which are tenanted by major multinational corporations.
Q-Capita owned 10 properties as of end-2008, of which four were acquired in 2008 alone with new lease contracts. The four properties, acquired for RM226.5 million, are purpose-built buildings tenanted by BMW, DHL, HSBC and Tesco. In the pipeline for 2009 is the acquisition of HSBC Malaysia's new headquarters in Kuala Lumpur.
Since its listing in early 2007, Q-Capita has grown its total and net assets to RM677 million and RM468.9 million respectively from RM524.2 million and RM413.6 million.
Its growth was underpinned by a strong shareholder in CapitaCommercial Trust — a unit of Singapore's government-linked CapitaLand Ltd, which owns a 30% stake in Q-Capita.
In a nutshell, Q-Capita should appeal to investors who are seeking decent dividend returns amid the current volatile market conditions, while anticipating certain capital gains from the REIT when the situation improves.
