INVESTMENT HIGHLIGHTS

• FY18 earnings within expectation

• CNI for the year jumped 29%yoy to RM35.0m

• 4QFY18 CNI rose 29.0%yoy to RM8.8m

• Maintain BUY with unchanged TP of RM0.91

FY18 earnings within expectation. AmanahRaya REIT’s core net income (CNI) of RM35.0m was within our full year estimate at 97%. Our CNI excludes valuation loss of RM18.0m and a one-off tax payment of RM5.9m. Comparison to consensus estimate is unavailable. ARREIT announced distribution per unit (DPU) of 1.45 sen for 4QFY18, bringing year-to-date DPU to 6.1 sen.

CNI for the year jumped 29%yoy to RM35.0m mainly due to the new contribution from Vista Tower since January 2018. In FY18, 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 60.1%yoy to RM96.7m due to the new income from Vista Tower. CNI rose by 10%yoy also due to the additional property income of Vista Tower, which is offset partially by higher financing cost and increase in property expenses. Property expenses increased by 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.

4QFY18 CNI rose 29%yoy to RM8.8m primarily in tandem with the 85.1% increase in its revenue to RM27.9m. The increase in CNI is not as much at the jump in revenue mainly due to the higher interest cost incurred. The REIT manager announced that it has entered into sales and purchase agreement for its Gurun Warehouse and Wisma AIC for RM8.8m and RM26.8m respectively. The disposals are expected to be completed by 2QFY19.

FY19F estimate unchanged as earnings are in-line. We have introduced our FY20F forecast.

Maintain BUY with unchanged TP of RM0.91 as we keep our earnings estimates. Our TP is based on the DDM (required rate of return: 8.4%, terminal growth rate: 1%). We maintain our BUY recommendation on ARREIT for its diversified assets base. Dividend yield of ARREIT is also attractive at 7.1%.

Source: MIDF Research - 15 Feb 2019