My market view
ARREIT (5127) – AMANAHRAYA REAL ESTATE INVESTMENT FUND
milosh
Publish date: Mon, 07 Jun 2021, 12:03 PM
milosh
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Killing my extra free time by sharing ideas.
For more check out my blog: http://miloshtrading.blogspot.com
<i>These articles are not trading recommendations, just expression of my personal views, please do your own "homework" when deciding to invest! I am not licensed advisor by SC and I am not recommending any action to buy, hold or sell. All articles here are based on publicly available data from Bursa Malaysia. I do NOT profit from it in any possible way.</i>
For more check out my blog: http://miloshtrading.blogspot.com
<i>These articles are not trading recommendations, just expression of my personal views, please do your own "homework" when deciding to invest! I am not licensed advisor by SC and I am not recommending any action to buy, hold or sell. All articles here are based on publicly available data from Bursa Malaysia. I do NOT profit from it in any possible way.</i>
ARREIT is my favorite recovery play MREIT, not exactly everyone’s choice right now, because this REIT had a little bit wild past even before COVID, but in my opinion, ARREIT has a good hidden value and a good outlook for the future.
Generally, REIT prices are still depressed across the board, so there are many gems hiding for value investors to discover, with great dividend potential right now already and a good price appreciation going forward. ARREIT has very strong and valuable portfolio and the rental income is at the bottom already.
Fast look at the chart from 4. June 2021
I don’t want to go into details describing what this particular REIT is all about, as it is found described everywhere and the latest details about their properties and occupancy rates can be found on bursa website in their financial result reports.
Shortly – the most important to watch is a Holiday Villa Alor Star (trouble maker) and recent big bet by ARREIT – The Intermark Vista (low occupancy right now).
For me is not important any “short term issue”, as it is really recovery play for me, so I look into future, when everything normalize and ARREIT gets back on the track – and it will eventually!
So now question is, what we are getting from them right now and what we can gain in the future?
Price at 4/6/2021: 0.65 RM
Trailing EPS last 4QR: 4.54 sen
Trailing P/E: 14.32
OK, so right now it looks like its well priced by PE ratio, BUT its elevated because of the last year “covid troubles”, NAPS is over 2x higher compared to the market price and last year dividend of 4.4 sen equal to 6.77% DY and the last QR is starting to look more promising with EPS 1.56 which I believe is what we can expect for the remaining of this year and increasing once covid scare go away.
EPS 2021 forecast: >6 sen (conservative prediction)
Target price: 0.75 RM (15% upside)
Target DY: 8.5% (5.5 sen)
More posts on my BLOG.
Disclosure: Im holding ARREIT
Disclaimer: Im not a professional financial advisor or a financial analyst or an economist or an accounter.
This is not a trading recommendation / advise, just my personal view
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DividendGuy67
Good to document and thanks for sharing your thoughts 2 years ago. At the time, price was 65 sen, today, 48 sen, or 27% drop. Are your views still the same, and are you still holding?
The NTA is broadly similar today vs 2 years ago, but price is 27% lower. Are you more excited to own more at lower prices?
2021 DPS (4.5 sen after tax) has dropped 31% since you last written. 2022 DPS is 3.07 sen after tax. Looks like market appears to be pricing relatively correctly i.e. price falls follow dividend cuts so far retrospectively. The question mark is always the future - how will future dividends be like?
ARREIT dividend keeps falling the past 5 years, every single year. If you ask me what will be 2023 dividend, I think more than 50/50 chance it will continue to fall. But last dividend was higher, so, maybe less than 50/50 chance it will continue to fall. Yet, this is visible to market, and earlier this year, price was higher than 65 sen. So, my guess is market knows something about ARREIT that is not good news, i.e. brace for even lower dividend in 2023, continuing the past 5 year trend of lower and lower dividends?
Last quarterly report showed that ARREIT earnings was hit by the Office segment, primarily Vista Tower. Net Property Income dropped YoY, from 13.4 down to 12.7m. Unfortunately, Finance costs spiked up YoY from 5.9m to 7.5m. What's left over after Finance cost is down from 4.3m down to 3.3m.
1 Quarter earnings of 3.3m, if annualized for 12 months is 13.2m is only 2.2 sen per share. At 48 sen per share the dividend yield will be around 4.6%, which is not too bad. I think it should be able to do more than 13.2m in 2023. This assumes it doesn't keep losing rental income.
The Vista tower purchase in 2017 I think is a mistake because it is such a huge purchase (523m relative to total assets of 1.2 billion) and comes with it high Finance costs, and now, rental is terrible but Finance costs becomes higher and continues. https://www.amanahrayareit.com.my/media/latest-news/amanahraya-reit-to-buy-the-intermarks-vista-tower/. Blackrock must be happy to dispose, they typically know something more.
ARREIT is asset rich, will it dispose one of its assets? At 48 sen market price, but NTA of nearly 1.30, a small sale should boost valuation hugely - use proceeds to pay off debts, become a cleaner REIT.
Management could have done this 3 years ago but didn't do anything. When will Management take action (if ever)?
ARREIT needs to pick a property and announce its intention to sell. Then, likely, the bottom is in. Until then, if next Quarterly report show worsening, price will keep falling.
2023-06-09 21:58