INVESTMENT HIGHLIGHTS

• 9MFY18 earnings missed slightly

• CNI for the period climbed 4.8% to RM26.2m

• 3QFY18 CNI rose 2.7%yoy to RM8.7m

• Maintain BUY with adjusted TP of RM0.91 (previously RM0.94)

9MFY18 earnings missed slightly due to higher than expected expenses. AmanahRaya REIT’s core net income (CNI) of RM26.2m came in slightly below our full year forecast, making up 72% of our full year estimates. 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 1.35 sen for 3QFY18, bringing ytd DPU to 4.65 sen.

CNI for the period climbed 4.8% to RM26.2m mainly due to the new contribution from Vista Tower since January. 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 nine months surged by 54.2% to RM69.9m in-line with the new income from Vista Tower. However, CNI did not rise as much as the jump in revenue because of higher financing cost and increase in property expenses. Property expenses increased by RM8.5m to RM12.6m during the cumulative period mainly due to major repair and refurbishment cost at HELP University, Selayang Mall and Holiday Villa as well as the inclusion of Vista Tower to its portfolio.

3QFY18 CNI rose 2.7%yoy to RM8.7m primarily because of the rental income from Vista Tower while revenue increased by 63.1%yoy to RM24.4m. Sequentially, CNI fell by 7.3% despite revenue that increased by 3.8% mainly due to higher property and non-property expenses.

Earnings for FY18F/FY19F trimmed by 3.0%/7.9% to RM35.9m/ RM38.7m in view of the higher than expected property and non-property expenses.

Maintain BUY with adjusted TP of RM0.91 (previously RM0.94) in tandem with the revision of our earnings estimates. Our DDM-derived valuation (required rate of return: 7.7%, terminal growth rate: 1%) is unchanged. 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 - 30 Nov 2018