INVESTMENT HIGHLIGHTS

• 1QFY19 earnings within expectation

• CNI for the quarter climbed 11.4%yoy to RM9.1m

• Earnings maintained

• Maintain BUY with an unchanged TP of RM0.91

1QFY19 earnings within expectation. AmanahRaya REIT’s (ARREIT) core net income (CNI) of RM9.1m met our expectation. Comparison to consensus estimate is unavailable. ARREIT announced a distribution per unit (DPU) of 1.50 sen for 1QFY19, which is also in-line with our full year estimates.

CNI for the quarter climbed 11.4%yoy to RM9.1m mainly due to the new contribution from Vista Tower since early 2018. Notably, 1QFY19 revenue climbed by 8.5%yoy to RM23.8m due to the rental income contribution from Vista Tower, which was slightly offset by the loss of rental income from Holiday Villa Alor Setar and Wisma AIC. CNI rose higher than the revenue mainly due to the lower interest expenses. The REIT manager has settled a revolving credit amounting to RM93m, which led to the lower borrowing costs among others. It has also incurred lower property expenses during the quarter.

Earnings maintained as we make no changes to our assumptions at this juncture. The REIT manager is looking to sell the AIC factory, which is vacant as well as the Gurun Automotive Warehouse that carry the fair values of RM26.8m and RM8.8m respectively.

Maintain BUY with an unchanged TP of RM0.91 as we make no changes to our earnings estimates. Our DDM-derived valuation (required rate of return: 8.4%, 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 - 27 May 2019