- Following the release of its 3QFY12 results, we re-affirm our
HOLD recommendation on Al-Aqar Healthcare REIT, with an unchanged fair value of
RM1.39/unit, based on a 10% discount to our DCF value. Given the significant
yield compression and rich valuation, our fair value implies a limited upside
of only 6.9%.
- Al-Aqar posted a good set of sequential earnings (+8%) for
3QFY12 at RM14mil. This brings its cumulative 9MFY12 earnings to RM40mil
(+21%), which came in broadly within our and consensus estimates, accounting
for 74% of each.
- No dividend was declared and we are maintaining earnings forecasts.
We project earnings to rise by 16% for FY13F, underpinned by full contributions
from its recently acquired Jeta Gardens, followed by 9% in FY14F and 10% thereafter.
- The rental income growth of 25% YoY was on the back of higher
new rental incomes contributed by recentlyacquired Jeta Gardens, Kluang Utama
Specialist Hospotal and Bandar Baru Klang Specialist Hospital. These assets contributed
circa RM13mil or 18% of rental income.
- The recent corporate proposal relating to the acquisition
of two pieces of land from KPJ Healthcare is pending approval from KPJ’s
shareholders at an EGM that is scheduled for 29 November 2012. To recap, the
land is for the expansion for the Puteri Specialist Hospital. Therefore, we
expect to see earnings expansion from this upon completion. The hospital is
likely to be injected in FY15F.
- We continue to assume Al-Aqar REIT will execute at least two
asset injections starting next year. Management has highlighted that there will
be no asset injection this year. Positively, KPJ is in the process of building
seven additional hospitals by FY15F, while five existing hospitals are planned
for expansion. In light of this, we do see an interesting and steady pipeline
of asset injections in the near-to-medium term, backed by KPJ’s expansion.
- Based on our estimates, dividend yields are relatively attractive
at 5.8% and 6% for FY12F and FY13F, respectively, compared to the bigger REITs
(FY12F –PavREIT: 4.5%; CMMT; 4.5%; IGB REIT: 5.1%).
- Albeit no earnings upside for now, we continue to like
AlAqar for its stable revenue stream underpinned by a single tenant risk, who
coincidentally is a strong healthcare provider in Malaysia. Hence, our HOLD
recommendation until we see constructive asset injections kicking-in.
Source: AmeSecurities
No comments:
Post a Comment