AmanahRaya REIT’s earnings to remain stable in FY17
KUALA LUMPUR: AmanahRaya Real Estate Investment Trust's (AmanahRaya REIT) earnings are expected by analysts to remain stable in financial year 2017 (FY17) while distribution per unit (DPU) is projected to maintain at six sen.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), AmanahRaya REIT is a high yielding REIT, with net dividend yield of approximately 5.6 per cent.
“Looking forward, we forecast AmanahRaya REIT's FY17 DPU to maintain at six sen,” MIDF Research said.
MIDF Research expected earnings of AmanahRaya REIT to remain stable in FY17 before growing by 7.5 per cent year on year (y-o-y) in FY18 as FY18 earnings will be mainly driven by lease renewal of SEGi University in Kota Damansara which is its top rental contributor.
Meanwhile, the research arm reckoned that Silverbird Factory which located in Petaling Jaya could be another income catalyst as AmanahRaya REIT has successfully repossessed the factory in the third quarter of 2016 (3Q16) after winning the court case against High-5 Conglomerate Berhad.
“The factory should enhance AmanahRaya REIT's FY18 earnings through higher rental income or one off disposal gain,” it added.
On another note, MIDF Research highlighted that Kenedix Inc (Kenedix), a Japanese real estate asset management company, had on December 19, 2016 entered into strategic agreement to buy 15 per cent stake in AmanahRaya REIT and 49 per cent stake in AmanahRaya REIT Managers Sdn Bhd.
The research arm was positive on the entry of Kenedix as it provides opportunities to AmanahRaya REIT to leverage on Kenedix's expertise in asset management initiatives while also allowing AmanahRaya REIT to secure high quality tenants by tapping into network of Kenedix.
“We understand that managements of AmanahRaya REIT and Kenedix are working closely to improve the asset portfolio of AmanahRaya REIT which we believe would bring fresh impetus to AmanahRaya REIT,” the research arm said.
As for AmanahRaya REIT's valuation, MIDF Research noted that it is attractive, trading at price to net asset value (P/NAV) of 0.8fold while most of the REITs are typically trading above NAV.
“We think that the discount to NAV is unjustified, considering that most of its assets under portfolio are having stable property valuation,” MIDF Research said.
As such, the research arm believed AmanahRaya REIT is undervalued where higher P/NAV should be warranted.
Overall, MID F Research initiated coverage on AmanahRaya REIT with a ‘buy' call.
The research arm opined that AmanahRaya REIT is an underresearched counter which should attract interest of yield seeking investors.
“Its rental income is partly back by its unique education property exposure,” the research arm said.
“Besides, the entry of Kenedix bodes well for the asset management prospect for AmanahRaya REIT.”