Hektar REIT’s 2QFY14 earnings came in line with expectations. Although revenue growth continued to be disrupted by Central Square’s ongoing revamps, management still declared a decent DPU of 2.60 sen. Earnings growth is expected to remain flattish in 2HFY14 due to ongoing refurbishments, although DPU is expected to remain at 10.5 sen for FY14. Maintain NEUTRAL and DDM-based FV of MYR1.43.
Results in line. Hektar REIT’s 2Q14 earnings of MYR11.5m (6.1% y-oy, 9.7% q-o-q) came in line with our estimates. Its revenue growth was flattish as it continued to be affected by disruptions from Central Square’s (CS) ongoing asset enhancement initiatives (AEI). Net property income (NPI) margin improved during the quarter to 61.7% (from 58.3%in 1QFY14) due to some writebacks in some provisions. Given the improvement in NPI, net profit margin also improved to 38% (from 34.7% in 1QFY14). It has announced a DPU of 2.60 sen, on track to meet our full-year forecast. Its overall portfolio occupancy is still stable at 94.4%, and average rental reversion is about 5% YTD.
Growth to remain flattish in 2HFY14. Hektar REIT continues to make good progress on the AEI front. The AEI for CS is expected to be fully completed by year-end. Currently, CS’ occupancy is at 84.2%, although this is expected to improve to above 90% once the works are completed.We believe that the full impact from this refurbishment should only be seen from 1QFY15 onwards. Mahkota Parade’s AEI, which will see the expansion of its cinema to 10 screens (from four currently), is already underway. This exercise should take about six months to complete.Given all these exercises, management has guided for flattish earnings growth in FY14, although FY15 should see an improvement in earnings.Nonetheless, management has reaffirmed its commitment to maintain a
DPU of at least 10.5 sen for FY14.
Earnings forecasts. We trim our FY14/15 EPU forecasts slightly by 2.4/1.0%, after revising some of our revenue assumptions. However, we are maintaining our FY14 DPU forecast of 10.5 sen.
Maintain NEUTRAL. Our DDM-based FV is unchanged at MYR1.43. Given Hektar REIT’s past track record, we remain confident in its DPU delivery.
Source: RHB
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Created by kiasutrader | Jun 14, 2016
Created by kiasutrader | May 05, 2016
derricksyl
Quater div 2.6 sen
2014-09-28 09:59