INVESTMENT HIGHLIGHTS

• 1HFY18 earnings within expectation

• CNI for the period rose 5.9% to RM17.5m due to contribution from Vista tower

• 2QFY18 CNI up by 14.1%yoy to RM9.4m

• Maintain BUY with unchanged TP of RM0.94

1HFY18 earnings within expectation. AmanahRaya REIT’s (ARREIT) core net income (CNI) of RM17.5m came in largely within our full year forecast, making up 47% of our full year estimate. Our CNI excludes valuation gain of RM67.1m and fair value gain of RM3m from the disposal of the Silverbird factory. Comparison to consensus estimate is unavailable. ARREIT announced distribution per unit (DPU) of 1.93sen for 2QFY18, bringing ytd DPU to 3.3 sen, which is broadly in-line.

CNI for the period rose 5.9% to RM17.5m due to contribution from Vista Tower. Vista Tower had started contribution since midJanuary this year. During the period, ARREIT has also sold off its Silverbird factory in Shah Alam for RM105m, which led to a RM3m fair value gain from the disposal. Revenue for the first half jumped by 49.8% to RM45.5m in tandem with the additional income from Vista Tower. CNI did not rise as much as the hike in revenue because of higher financing cost and increase in property expenses. HELP University, Selayang Mall and Holiday Villa Langkawi had incurred major repair and refurbishment cost during the period.

2QFY18 CNI up by 14.1%yoy to RM9.4m primarily because of the rental income from Vista tower and lower finance cost for the quarter due to repayment of debt following the sale of the Silverbird factory. Revenue increased by 55.5%yoy to RM23.5m. Sequentially, CNI increased by 14.5% as revenue increased by 7.2%qoq primarily attributed to the full quarter impact from Vista Tower.

Maintain BUY with unchanged TP of RM0.94 as we make no changes to our earnings estimates and expenses assumption. Our DDMderived valuation (required rate of return: 7.7%, terminal growth rate: 1%) is retained. We maintain our BUY recommendation on ARREIT for its diversified assets base. Dividend yield of ARREIT is also attractive at 6.6%.

Source: MIDF Research - 3 Sept 2018