A snapshot of Subang Parade view.

With interest rates on the declining trends and strong Ringgit’s performance, consumer spending is expected to rise ahead in 2024 to 2025. Hence, it is very reasonable to assume that investors would further shift their focus towards Real Estate Investment Trusts (REITs).

On Bursa Malaysia, we are blessed with a decent count of REITs amounting to 19 of them, with most of them are either mixed or retail focused. However, one of the REITs really stands out and caught my attention - Hektar REITs. 

Based on their information provided as at 30 June 2024, the company now owns 6 retail malls located in niche regions. Take for example, Mahkota Parade is arguably one of the most sought after malls in Melaka. 

Malls portfolio of Hektar REITs with rental reversion rate.

Currently, the average portfolio occupancy rate of Hektar REITs is at 87.2%, which is a significant improvement as compared to 84.9% in FY2021. Most notably, the average rental rates also increased significantly, signifying that there is high demand from tenants.

To diversify their concentration risks, Hektar REITs also announced the acquisition of Kolej Yayasan Saad Melaka (KYS) for a sum of RM148.5 million. According to the management, this acquisition is yield accretive in nature, which could also mark their expansion into the education sector.

Financial performance summary of Hektar REITs.

In terms of financial performance, Hektar REITs also showed a very positive growth in Q2 FY2024, thanks to the acquisition of KYS. Now, Hektar REITs carries a semi-annual distribution policy, where for 1H FY2024, the company declared and paid a total dividend of 1.90 sen. 

Assuming a similar financial performance by Hektar REITs in the 2H of 2024, we could expect the payout to be double of 1.90 sen, which is 3.80 sen. Given the current share price of  Hektar REITs of 51.5 sen, the annualised yield on costs would be 7.38%, much better than a lot of investment instruments in the market.

Most notably, the Net Tangible Asset (NTA) of Hektar REITs is currently 105.36 sen, which is more than double from what is the recent traded price of the REIT. Hence, the risks for investors to go in at this moment, is relatively low. 

We hope this helps!