Monday, February 18, 2013

Evaluation of AMFIRST REIT (UNDERVALUED)

Hi all, I am going to share with you one of the idea to evaluate the fundamental price of stocks.

AMFIRST Reits is mainly investing on rental properties. AMFIRST is collecting rental fees and distribute it to shareholders. With the current price of 1.05 per unit, the expected (99% confirm) annual dividend yield is 9%.

Why AMFIRST is worth buying? 
I tell you why using numbers. Please continue reading.

Is it critical to political issue?
No, not really Due to the nature of the business, AMFIRST is investing in properties. So, no matter how the noisy the politics is, still properties will increase in price and thus leads to increase in stock price.

Evaluation of AMFIRST REITS

Number of Rental Properties: 9
Latest Evaluation of Properties Values: approximately RM850 million.

Total AMFIRST Shares in Market: 686,401,600 (That is 686.4 million units)

By using the NTA per share calculation, we can easily calculate the price of AMFIRST stock in the market:
Net Tangible Asset (NTA) Per Share = 850 million / 686.4 million = RM1.2383 per unit.

This calculation is only taking into account the Values of Properties! We have not include the earnings per share (EPS) of AMFIRST yet.

The market price of AMFIRST now is RM1.05 only. That is a big discount from the real value. Is it worth buying?

Not Convince?
Well, let us have a look at the square feet that is rent-able.

Total Rent-able Square Feet: 1,879,494 Square Feet
Market Capitalization: 686,401,600 x 1.05 = RM720,721,680

How much money are we paying per square feet?
RM720,721,680 / 1,879,494 = RM383.50 per square feet.

From the above values,we are seeing that the current stock price of RM1.05 per unit is actually mean that the properties are priced at only RM383.50 per square feet. That is REALLY cheap!

Why cheap? Really cheap!
SS2 area - 1200 square feet property cost around RM650,000 (That is RM550 per square feet)
Damansara area - 900 square feet property around RM550,000 (That is RM610 per square feet)

With RM383.50 per square feet, you can see that it is priced at only 70% of the market value. There is a gap of 30% from market value. 30% discount just by buying the stocks, you do not need to buy real property and you get rental income that is distributed to us (shareholder) 9% per annum.

By buying 10,000 units of AMFIRST, you need RM10,500.00. You are actually holding 27 square feet around KL area. You do not need large amount of money to invest in properties. In addition, you are paid 9% per annum on the toal amount you paid and that is: RM10,500 x 9% = RM945.00.

That 27 square feet will eventually increase in price and earn you more money when the stock price goes up in the future. You can slowly buy more when you have more money and that is by buying the stocks of AMFIRST REITS or any other REITS.

Why not other REITS?
Well, from my research, I found that AMFIRST is now the lowest price among all other stocks by comparing the dividend yield. So, I think it is the most worth to buy REITS of all. 

Are you interested to invest in AMFIRST REITS yet?

2 comments:

NG said...

Hi May i ask the " 1,879,494 Square Feet" where to find? i found 2,784,093 sq.ft at the last quarter report?
Do you mind to share why you comfirm 9% of dividend yield?

William Lee said...

Hi Ng,
Sorry for late reply. I deduct around 33% from the total square feet for more conservative calculation because not all spaces are rented out.

9% is not confirm but based on the rental income. We can know that the amount of dividend will be roughly the same every year and might be higher. Based on 1.05 per unit, the dividend per share is around 9% per annum.

With the real estate price going up fast, we can expect rental income to rise as well. So, 9% is almost confirm if you manage to buy it at 1.05 per unit.

Hope that clarify your questions. :)

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