The significance and performance analysis of Malaysian real estate investment trusts

Abstract

Purpose This paper aims to examine the significance and performance analysis of the Malaysian Real Estate Investment Trust (M-REIT) from 2014 to 2018. Design/methodology/approach Performance analysis is done through operating ratio (current ratio), leverage ratio (debt ratio) and efficiency ratio (return on asset and return on equity). Findings M-REIT has been ranked 27th globally and 7th in Asia Pacific REIT market, implying the significance of the market. The trend of market capitalisation of M-REIT had flourished from 2014 to 2017 but declined in 2018. The total assets of M-REIT have been seen thriving over the years with both Islamic REIT market capitalisation and total assets showing improvements throughout the year. From the viewpoint of efficiency ratios of ROA and ROE, Islamic REIT is deemed more favourable to investors than conventional REITs, implying the high receptive of Islamic REITs. Research limitations/implications In terms of efficiency of operation, it is evident that several sectors of REITs may be at risk of liquidity due to the decline in current ratio from 2014 to 2018, as current ratio of less than 1 is considered a red flag. Originality/value Performance analysis on the performance of each sector as the outcome of the research could ease investors’ decision-making as whether it can be considered as one of the viable investments available in the market.