1Q19 realised net income (RNI) of RM19.4m came in well within our and consensus expectations at 23% and 24%, respectively. No dividends, as expected. FY19-20 will see minimal lease expiries of 19-18% of NLA on flattish reversions. Maintain FY19-20E CNP of RM84.1-84.3m. Maintain MP and TP of RM1.10.
1Q19 realised net income (RNI) of RM19.4m came in well within our and consensus expectations at 23% and 24%, respectively. No dividends, as expected.
Results’ highlights. YoY, top-line was down by 6% mainly from lower rental contributions from Platinum Sentral, Wisma Technip, and QB5 likely due to tenant incentives, as well as loss of revenue from the disposal of QB8 - DHL XPJ, which was completed in 2Q18. NPI margin was flattish at 77%, but RNI declined by 8% on the back of higher financing cost (+2%). QoQ, top-line declined by 3% likely due to similar reasons mentioned above. However, lower property operating expenditure (-7%) due to better cost management and lower financing cost (-10%) softened the impact on bottom-line, which only declined by 1%.
Outlook. FY19-20E will see minimal leases up for expiry, 19-18% of net lettable assets (NLA) which are comforting given the tough office market conditions due to the oversupply of office spaces in KL and the Klang Valley, and risk of tenant attrition. Going forward, we are expecting flattish to low single-digit reversions for MQREIT’s assets, and expect minimal capex of RM12-10m, mostly for maintenance.
Maintain FY19-20E CNP of RM84.1-84.3m Our FY19-20E GDPU of 7.7-7.7 sen (NDPU of 7.0-7.0 sen), suggest gross yield of 7.0-7.0% (net yield of 6.3-6.3%), respectively.
Maintain MARKET PERFORM on an unchanged Target Price of RM1.10 on FY19E GDPS of 7.7 sen and a +3.1ppt spread to the 10- year MGS target of 3.90%. Our applied spread on MQREIT is the highest compared to other sizeable MREITs under our coverage (+1.3ppt to +3.1ppt) due to tough market conditions on concerns of oversupply in the office space. MQREIT is commanding decent gross yield of 7.0%, which is above its peers’ average gross yield of 5.7%, but we believe this is justifiable given the abovementioned concerns for office assets. However, we are comfortable with our call as we believe we have priced in most downside risks into MQREIT’s valuations and earnings.
Risks to our call include bond yield expansions or compressions and weaker/stronger-than-expected rental reversions.
Source: Kenanga Research - 10 May 2019
Chart | Stock Name | Last | Change | Volume |
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Created by kiasutrader | Aug 16, 2024
Created by kiasutrader | Aug 16, 2024
Created by kiasutrader | Aug 16, 2024
Tell me what will be next QR like?
Down further?
Flat?
Up?
You are going to tell the world regardless what next QR be -- within expectation!
Really idiotic anal-list.
Just like recommending Parkson with TP 80 sen............
2019-05-10 09:31
I am telling you, Platinum Sentral and Wisma Shell going to make some impairment later.
These properties were bought with grossly inflated price.........from vendor related to property managers.
2019-05-10 09:33
Later MRCB is going to inject Ascott Sentral for 200m.
Market valuation 150, book value 90m, can't sell for years, but will be able to offer to MQReits at 200m.........so called willing buyer willing sellers mah.......
2019-05-10 09:51
I think the CEO should be sacked for not delivering result. Gaji buta
2019-05-10 19:21
ks55
Within expectation?
You have been expecting revenue to come down?
You have been expecting reversion rate to come down?
You have been expecting profit to come down?
You have been expecting impairment for Platinum Sentral and Wisma Shell?
Then why you never recommend to sell?
Canon behind horse!
2019-05-10 09:27