The relationship of Malaysian REITs’ portfolio and its financial performance

Abstract

Malaysian real estate investment trust (M-REITs) starts since 2006, is different in term of its properties’ holding in portfolio and this resulted a poor response from institutional investors. Thus, this study aims to examine the relationship of M-REITs properties portfolio and its financial performance. A ten year data had been employed and correlation analysis is adopted. This study reveals that property portfolio allocation in commercial mall had significant correlation relationship with M-REITs’ size of market capitalization in such property market value analysis (r: 0.94) and property holding percentage (r: 0.63). Meanwhile, allocation in industrial building also show to have significant correlation relationship with dividend and total return index (TRI). Similarly, with property portfolio allocation in hotel and resort significant correlation relationship with M-REITs’ size of market capitalization which are (r: 0.49). However, both commercial mall and industrial building had insignificant correlation relationship with M-REITs’ financial performance such as dividend per unit (DPU), dividend yield (DY) and total return index (TRI). On the other hand property portfolio allocation in industrial building showed a contradict result in which they have insignificantcorrelation relationship with M-REITs’ size of market capitalization, yet had significant correlation relationship with DPU, DY and TRI. This study reveal that the bigger portfolio allocation on commercial mall as well as hotel and resort property were unable to generate sufficient return to M-REITs, and issue on the ethical of M-REITs property acquisition warrant special attention in future. Yet, there were few insignificant correlations among property type allocation of M-REITs, in which this might indicates that potential diversification for maximize the return and minimize the risk which M-REITs could offers.