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Hektar REIT's 3Q2024 Results: Positive

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OntologicalNot Invested
Community Contributor

Published

October 22 2024

Updated

November 28 2024

Narratives are currently in beta

28 November 2024

Catalysts

1. Hektar REIT (KLSE: 5121) portfolio of retail and education properties throughout Malaysia.

2. YTD Total revenue increased by 12.9% to RM94.8 million.

3. YTD Net Property Income increased by 8.6% to RM50.0 million, due to the recognition of income for Kolej Yayasan Saad.

4. Achieved a secure portfolio occupancy rate of 88.8% with positive rental reversion of 7.2%

5. Goal to double the portfolio by 2027.

6. Asset enhancement initiatives continue at Hektar Malls.

Industry Tailwinds

1. Malaysian economic expansion of 5.3% in the third quarter 2024.

2. The inclusion of an education asset strengthens the resilience; generating stable income.

Industry Headwinds

1. Overnight Policy Rate (OPR) directly affected finance costs.

2. Inflationary pressure directly contributes to spending trends.

3. Slow adoption of digital storefront usage.

Financial Metrics-Revenue, EPS

YTD Revenue: RM94.8 mm from RM65 mm

YTD EPS: RM 2.73 from RM 2.42

Assumptions

Where do you think revenue will be in 5 years time? and why?

Revenue in 5 years will be RM120 mm from the diversification and portfolio growth.

Where do you think earnings will be in 5 years time? and why?

Earnings in 5 years will be RM 50 mm conservatively for acquisition costs.

Risks

Various assets within the property portfolio are under improvement, meaning construction and general work in the customer areas. The possibility of a negative event exists.

The strength of the 3Q2024 results are positive and paints an upward trajectory for Hektar REIT.

Value in a REIT-Hektar REIT (KLSE: 5121)

Catalysts

1.     Hektar REIT (KLSE: 5121) portfolio of retail and education properties throughout Malaysia, where retail-sales grew around 4.6% in 1H24.

2.     Future portfolio diversification; successful acquisition of Kolej Yayasan Saad (KYS).

3.     Goal to double the portfolio by 2027.

Industry Tailwinds

1.     Malaysian strong economic recovery since the pandemic

2.     Positive Malaysian economic policies for 2025

Industry Headwinds

1.     Inflationary pressure directly contributes to spending trends

2.     Slow adoption of digital storefront usage

Financial Metrics-Revenue, EPS

YTD Revenue: RM65 mm

YTD EPS: RM 2.42

Assumptions

Where do you think revenue will be in 5 years time? and why?

Revenue in 5 years will be RM120 mm from the diversification and portfolio growth.

Where do you think earnings will be in 5 years time? and why?

Earnings in 5 years will be RM 50 mm conservatively for acquisition costs.

Risks

Consideration of natural disasters or events that diminish consumers ability to access a location will affect business for Hektar REIT. Economic pressures such as inflation impact the entire country’s spending. Digital platforms offer marketing and sales opportunities which may not be feasible for brick-and-mortar stores. Acquisition deals involve areas of risk which are not always apparent; structural issues, infrastructure damage, hidden maintenance costs.

The leadership and management of Hektar REIT as experienced real-asset managers provides the stability to progress into the growth with careful due diligence and timely execution.

 

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Disclaimer

The user Ontological holds no position in KLSE:HEKTAR. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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Fair Value
RM 0.6
9.5% undervalued intrinsic discount
Ontological's Fair Value
Future estimation in
PastFuture0200m400m600m800m1b1b20132016201920222024202520282029Revenue RM 1.3bEarnings RM 509.8m
% p.a.
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Current revenue growth rate
4.78%
Retail REITs revenue growth rate
0.09%