PETALING JAYA: RHB Research has turned bullish on the prospects of AME Real Estate Investment Trust
(AME-REIT), commenting that the latter’s earnings are in line with expectations, recording stable growth from its fully occupied properties.
The research house reported that AME-REIT’s core profit for its first financial quarter ended June 30 of financial year 2025 (1Q25) of RM8.9mil had fulfilled expectations at 24% of its full-year forecast.
“Revenue grew 8% year-on-year mainly from the contribution of Plot 16 Indahpura which was acquired in October 2023, but dropped 1% quarter-on-quarter as two properties were temporarily vacant before a new lease commenced in June,” said RHB Research in a note to clients.
It observed that AME-REIT earnings only increased 3% due to both lower net property income or NPI margins and higher financing costs following the acquisition, as the REIT proposed a distribution per unit of 1.84 sen.
At the same time, the investment trust had announced that it had entered into sale and purchase agreements with sponsor AME Elite Consortium Bhd for the proposed acquisition of four industrial properties for a total cash consideration of RM119.5mil.
The securities firm noted that the price is a 2% discount from its market value of RM122mil.
The acquisition of i-TechValley 46 and i-Park at Senai Airport City (SAC) 60 and 61 is expected to be completed in the first quarter of next year.
“Meanwhile, i-Park SAC 60 and 61 and iTechValley 34 are still under construction, hence the acquisition should only be completed in 3Q25,” it said. All the properties are located in Johor.
The proposed acquisitions provide a combined gross yield of 7% and long-term leases, with RHB Research saying they are also situated in a strategic location within Iskandar Malaysia.
“We are positive on the proposed acquisitions.
“The leases are for a period of five to 10 years with built-in rental escalations between 2.9% and 10% per annum. There is also an option to renew for a further period of three to five years,” added the research outfit.
It pointed out that AME-REIT’s gearing would increase to 27% from just 14.8% as at 1Q25 following the completion of the acquisitions.
At that level, RHB Research is estimating that the REIT would have a financing headroom of RM380mil before reaching the 50% gearing limit.
“We upgrade our call to a ‘buy’ as we turn more positive on its inorganic growth opportunities on top of the long-term viability of existing properties,” said the securities firm, which has a target price of RM1.53 on AME-REIT.
