KUALA LUMPUR (Feb 6): AME Real Estate Investment Trust (AME REIT) is expected to post better full year results in 2024 after its latest quarterly and nine-month earnings came within expectations, said Hong Leong Investment Bank Bhd (HLIB).

The projection is supported by the REIT’s full renewal and replacement of its remaining three tenancies in financial year 2024 (FY2024) and an average rental reversion of about 6%, HLIB said in a note on Tuesday.

Worth noting that AME REIT’s earnings for the third quarter ended Dec 31, 2023 (3QFY2024), were bolstered by the completed acquisition of Plot 16 Indahpura in October last year.

AME REIT’s core net profit of RM9.2 million in 3QFY2024 and net profit of RM26.5 million for the nine months of FY2024 came in within HLIB’s expectations at 78% of the full-year forecast.

“AME REIT’s portfolio consists of 34 industrial properties and three industrial-related dormitories. The overall occupancy rate remained robust at 100%. Meanwhile, its gearing level increased to 15.2% (from 11.4% in 2QFY2024).

“Looking ahead at FY2025, with only two leases up for renewal, the downside risk of non-renewal of tenancy is minimal with occupancy rates likely remaining at 100%,” it said.

Therefore, HLIB maintained its “buy” call on AME REIT with a higher target price (TP) of RM1.41 (from RM1.34) as the research house increased its distribution payout ratio (DPR) assumption for FY2025 to 100%.

“We make no changes to our forecasted EPU (earnings per unit) as results were in line but we increase our DPR from 95% to 100% as we believe that management will be able to payout our forecasted FY2025 DPU of 7.2 sen (9MFY2024 DPU of 5.48 sen makes up 112% of 9MFY2024 EPU of 4.88 sen).

Besides AME REIT's ample gearing headroom allowing for additional acquisitions, HLIB favoured the REIT due to its strong sponsor with an established track record and brand name (i-Park), as well as the sponsor and management’s complete suite of capabilities in the supply chain of industrial properties.