AL-’AQAR Healthcare REIT’s earnings for the first half of its 2020 financial year came in below expectations, weighed down by the rental rebates offered by the REIT as assistance, according to MIDF Research.
“Al-‘Aqar’s 1H20 core net income of RM26.1 mil came in in below our expectations, making up only 41% of our full year estimates, as earnings in the second quarter of its 2020 financial year were weighed by rental rebates to tenants,” said MIDF analyst Jessica Low.
The analyst noted that the REIT’s 2Q20 came in 31.9% lower quarter-on-quarter (qoq) at RM10.6 mil due to the REIT providing the rental rebates.
“Note that the Covid-19 outbreak and imposition of the movement control order (MCO) has hurt the business of private hospitals, and Al-`Aqar has granted rental rebates based on the actual performance of each property. Looking forward, management has yet to decide on the rental rebate for tenants in 3Q20, pending monthly performance data from tenants,” said Low.
It was noted that Al-’Aqar’s earnings were also dragged down by higher financing costs, due to the drawdown of additional Islamic financing in Dec 2019.
MIDF downgraded its call from buy to neutral for Al-’Aqar, with a lower target price of RM1.42 from a previous RM1.52, due to the muted earnings outlook and limited upside the research house sees for the REIT.
At the end of the trading day, Al-’Aqar’s shares were last done at RM1.39, up a sen, with 206,000 shares traded. – Sep 1, 2020
