Overview

Al-Hadharah Boustead REIT is the first Islamic plantation-based real estate investment trust (REIT) launched in Malaysia. It is also the largest Islamic REIT in Malaysia with a market capitalisation of approximately RM551 million as at 31 December 2009.

Listed on 8 February 2007 on the Main Board of Bursa Malaysia Securities Berhad, Al-Hadharah Boustead REIT's principal investment strategy is to own and invest primarily in plantation assets comprising plantation estates and mills. The primary objectives of the Fund are to provide Unitholders with stable distribution of income/yield and to achieve long term growth in the NAV per Unit of the Fund.

As at 31 December 2009, the Fund comprises of ten oil palm estates and two palm oil mills in Peninsular Malaysia covering 16,419 hectares.

	Plantation Assets as at 31 December 2009	Land Area (hectares)		Purchase Consideration (RM'000)		Latest Valuation (RM'000)
	Bekoh Estate, Johor	1,226		33,510		48,000
	Malaya Estate, Perak	922		20,770		36,000
	Kulai Young Estate, Johor	803		40,850		51,500
	Bukit Mertajam Estate, Kedah	2,173		96,970		109,000
	Ladang Batu Pekaka, Kedah	969		38,630		44,500
	Chamek Estate, Johor	817		22,020		40,000
	Telok Sengat Estate and Telok Sengat Palm Oil Mill, Johor	3,712		147,400		221,191
	Lepan Kabu Estate and Lepan Kabu Palm Oil Mill, Kelantan	2,044		71,750		84,967
	Malakoff Estate, Pulau Pinang	1,397		100,500		101,500
	Bebar Estate, Pahang	2,341		88,300		93,500
	Total	16,404		660,700		830,158

Income Streams

Under the Al-Hadharah Boustead REIT, plantation assets will be leased back to the vendors for a three-year renewable tenancy with a cumulative period of up to thirty years. At the end of every three years, the fixed rental will be reviewed and a new rental will be agreed between the parties. The new rental will be determined based on historical crude palm oil (CPO) prices, prevailing and expected future CPO prices, cost of production, extraction rates and yield per hectare. Hence, income sources for Al-Hadharah Boustead REIT include:

Fixed Rental

With the renewal of the Ijarah agreement effective from 1 January 2010, the fixed rental income for the second tenancy term is increased from Tenants will pay a cumulative fixed rental of approximately RM53.2 million to RM57.8 million per annum for the first tenancy term of three years. This will be payable on a bi-monthly basis.

Performance-Based Profit Sharing

In addition to a fixed rental, the Al-Hadharah Boustead REIT may enjoy an annual profit sharing of net incremental income based on a formula pegged to CPO and fresh fruit bunch (FFB) prices. This net incremental income is determined based on the actual CPO price realised for the year, above the reference price of RM2,000 per MT for the first next three years. It will be shared on a 50:50 basis between the tenants and the fund. This profit sharing payment is the first of its kind in the REIT market and may translate into more handsome dividend yields for investors.

Capital Gains

Given the development potential of some of the plantation assets, especially those located in prime locations; there is a potential upside for capital gains. The gains realised may be distributed as bonus dividends.

Dividends

The Manager has in the past distributed more than 90% of the Fund's taxable profit for the relevant year on semi-annual basis. However, the Board of Directors of the Manager may at its discretion change the percentage and frequency of the distribution to be made to the unitholders.

The source income for the dividend distribution comes from the fixed rental and performance-based profit sharing (if any). On top of this, unitholders may also enjoy a bonus dividend resulting from realised capital gains on disposal of the Fund's asset.

Future Growth

With the Boustead Group's well established and proven track record in the plantation sector since the 1900s, the Al- Hadharah Boustead REIT offers an investment opportunity spearheaded by an organisation that has strong operating cashflows complemented with a professional management team.

The Al-Hadharah Boustead REIT is unique as it features embedded growth potential. There is a planned second phase injection of plantation assets. The Group also has a total plantation portfolio in excess of RM1 billion in value which provides new opportunities for further growth.

The Al-Hadharah Boustead REIT is an attractive investment alternative. It offers investors a projected dividend yield of over 7%. This compares favourably to the average dividend yield of 3.0% for selected plantation stocks. In light of the current debt free status of the fund, the Al-Hadharah Boustead REIT affords greater flexibility in achieving enhanced growth for its unitholders.

Structure of Al-Hadharah Boustead REIT