- We reaffirm our HOLD recommendation on Al-‘Aqar Healthcare REIT with an unchanged fair value of RM1.50/unit, based on a DCF valuation.

- Al-‘Aqar REIT reported 2QFY15 distributable income of RM15mil, bringing 1HFY15 distributable income to RM30mil (+2% YoY).

- The results met expectation at 48% of our full-year projections of RM62mil and consensus as well.

- Dividend of 5.2sen/unit was declared.

- The increase of 1.6% YoY in rental income is in line with the properties’ yearly increment of about 2% per annum.

- Occupancy remains solid at 100%.

- We make no changes to our FY15F-FY16F earnings estimates. Earnings growth is expected to remain organic in the near term – underpinned by stable rental escalation.

- While its acquisition pipeline remains bright, underpinned by KPJ Healthcare’s expansion plans, we do not expect any near-term acquisition. This is given that KPJ’s new hospitals are still in gestation period and are not ready for injection. We only foresee KPJ injecting its new hospitals in the medium term when they reach full efficiency.

- Our HOLD call remains unchanged. At the current level, the stock is trading at a distribution yield of 5.9%, and at a yield spread of 151bps against the 10-year Malaysia Government Securities.

Source: AmeSecurities Research - 26 Aug 2015