Downgrade: Here's How This Analyst Sees Al-Salam Real Estate Investment Trust (KLSE:ALSREIT) Performing In The Near Term

The analyst covering Al-Salam Real Estate Investment Trust (KLSE:ALSREIT) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.

Following the downgrade, the current consensus from Al-Salam Real Estate Investment Trust's solo analyst is for revenues of RM83m in 2023 which - if met - would reflect a meaningful 13% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to nosedive 74% to RM0.029 in the same period. Prior to this update, the analyst had been forecasting revenues of RM93m and earnings per share (EPS) of RM0.046 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

View our latest analysis for Al-Salam Real Estate Investment Trust

The analyst made no major changes to their price target of RM0.48, suggesting the downgrades are not expected to have a long-term impact on Al-Salam Real Estate Investment Trust's valuation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Al-Salam Real Estate Investment Trust's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 13% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 4.1% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to decline 0.4% per year. So although Al-Salam Real Estate Investment Trust is expected to return to growth, it's also expected to grow revenues during a time when the wider industry is estimated to see revenue decline.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Al-Salam Real Estate Investment Trust. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Al-Salam Real Estate Investment Trust after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2025, which can be seen for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.