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DAR Wong: 3 Ways To Look At FREIT & What You Can Do
Aspire, Thought Leaders | 05 November 2015
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By: Vance Wong
Articles (74) Profile

In light of the Indonesian government’s decision to remove double taxations on Real Estate Investment Trusts (REITs) in Indonesia, Lippo Group’s CEO James Riady expressed his plans to shift FREITS (First REITs AW9U.SI) and LMIRT (Lippo Malls Indonesia Retail Trust D5IU.SI).

As noted by OCBC Research, Riady decided to have this plan probably because of the tax incentives offered by the Indonesian government. Currently, FREIT and LMIRT have to pay a withholding tax whenever they remit payouts to unitholders.

Investment strategist and director of Dektos Investment Corp and experienced fund manager DAR Wong shared his thoughts about FREIT and advice about what investors can expect.

Shift to Indonesia Will Increase FREIT’s Returns

Basically, First REIT spreads its diversified portfolio over 16 properties worth more than $1 billion, covering 12 properties in Indonesia, three in Singapore and one in South Korea.

In other words, the current yields of this Trust Fund literally generates on higher percentage from Indonesia returns. DAR says that we can look at the situation from a few angles.

1. If the Trust Fund wishes to reduce the asset in Singapore and South Korea while switching the fund back to Indonesia, yield may increase due to higher tax incentives. This will benefit investors on long term basis.

2. If the Trust Fund plans to de-list from Singapore Exchange (SGX) and re-list in Indonesia Stock Exchange (IDX), then it will be a massive protocol to liquidate all funds back to investors before they can canvass new funds in a new IPO in the separate stock exchange (IDX).

However, this will be a difficult task since a huge fund size will be required for such a settlement. In addition, we are still uncertain of what impact will be generated as there could be a bonus compensation or may be subjected to prevailing market price.

3. If the Trust Fund plans to dual-list in Indonesia Stock Exchange (IDX), that means the company might canvass more fund for broader expansion in assets. Likewise, profits must be generated in higher percentage in order to pay dividends on both stock exchanges.

This will largely depend on the acquisition of Indonesian properties due to the promotion of tax-incentives by local government. Even though, it is hard to predict the consequences since property demand is beginning to slide in ASEAN regions from this year.

Investors’ Takeaway

Nevertheless, in DAR’s personal opinion, there is no fixed rule to lay the prediction until we hear the final announcement from FREIT in near future. For investors that are closely watching Lippo Group and specifically FREIT, you can expect bigger dividend yields when CEO Riady decides to reduce Singapore and South Korea assets and shift focus to Indonesia.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.

First REIT  1.060 -0.010 -0.93%   
Business: Co is a healthcare real estate investment trust. [FY18 Geographical] Indonesia (96%), Singapore (3.4%), Korea (0.6%).

Insight: Apr-19, 1Q19 gross revenue was slightly down by 0.... Read More
Lippo Malls Indonesia Retail Trust  0.230 -0.010 -4.17%   
Business: REIT that is engaged in invs in retail ppties in Indonesia.

Insight: Apr-19, 1Q19 gross rental income slid 7.1% due to ... Read More

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