by S BIRRUNTHA / pic by TMR FILE
MERCURY Securities Sdn Bhd has lowered its earnings forecast for Atrium Real Estate Investment Trust’s (Atrium REIT) for financial year 2022 (FY22) to RM23.1 million from RM27.7 million previously.
The broker stated the cut was because it is expecting lower net property income and higher expenses for the group than previously estimated.
“In line with our lower forecast net profit and distributions, we are reducing our target price to RM1.69 from RM1.83 previously which represents a potential upside of 14.2% to the current price,” it said in a note on Monday.
For the fourth quarter ended Dec 31, 2021 (4Q21), Atrium REIT registered a net loss of RM0.4 million against a net profit of RM5.9 million in 4Q20, dragged by a negative change in fair value of investment properties amounting to RM5.2 million.
The group also registered a slight dip in net property income to RM9.1 million from RM9.3 million a year ago.
Atrium REITs FY21 net profit decreased 13.1% to RM18.2 million from RM21 million in FY20, mainly due to a decline in net profit attributed to negative change in fair value of investment properties.
The trust reported a 13% increase in net property income to RM36.4 million from RM32.2 million in FY20, supported by the increase in net property income came on the back of higher revenue due to the rental income from Atrium Bayan Lepas 1 which commenced in October 2020.
Atrium REIT declared total distributions amounting to 9.75 sen per unit in respect of FY21 against nine sen in FY20.
Mercury Securities is encouraged by the growth in distributions as well as Atrium REIT’s healthy trailing 12-month gross distribution yield of 6.6% based on distributions declared in respect of FY21.
Moving forward, the broker noted key risks for the group include inability to rent out properties at reasonable rental rates once existing leases expire.
Atrium REIT remains cautious due to the uncertainties surrounding the economic recovery as a result of the current Covid-19 pandemic.
Despite the uncertainties and the challenging market conditions, the trust stated its portfolio of properties remain resilient and are expected to continue delivering sustainable performance for 2022.
The occupancy rate for the Atrium REIT’s portfolio of properties as at Dec 31, 2021, was 100% except Atrium Shah Alam 4, which is untenanted as the manager is undertaking a major asset enhancement initiative (AEI) to upgrade the existing factory building to a grade A warehouse facility.
The AEI has commenced and is targeted to be completed by 4Q22.