KUALA LUMPUR: MRCB-Quill REIT's (MQReit) realised net income rose 43.3% to RM22.04mil in the second quarter ended June 30, 2017 from RM15.39mil a year ago but cautioned that the operating environment for the office market remains challenging.
MRCB Quill Management Sdn Bhd, the manager of MQReit, said on Friday other factors for the higher net income was the rental reversions from several properties and the recognition of income from Menara Shell, net of higher finance costs and manager's fee.
It said revenue rose 39.8% to RM43.61mil from RM31.19mil. Earnings per share were 2.26 sen compared with 2.33 sen.
MQReit said notwithstanding the higher realised net income, MQReit’s realised earnings per unit (EPU) for Q2 of 2.26 sen was lower by 2.7% compared to the 2.33 sen a year ago.
This was due to the increase in the MQReit’s weighted average units in circulation arising from the issuance of 406.619 million placement units pursuant to the placement exercise completed in December 2016.
For the first half, MQReit earnings rose 47.6% to RM45.21mil from RM30.62mil in the previous corresponding period. Revenue rose 38.8% to RM90.18mil from RM64.94mil.
“The annualised 1H 2017 distribution per unit (DPU) translates to a yield of 6.46% based on MQReit’s closing price of RM1.31 on June 30, 2017.
“With the books closure date being Aug 28, the DPU of 4.23 sen is expected to be distributed Sept 18,” it said.
MQM chairman Tan Sri Saw Choo Boon consumer and business sentiments were still expected to remain cautious in the near term.
“The operating environment for the office market remains challenging with the anticipation of more office supply entering the market.
“To mitigate this impact on MQReit’s operations, the Manager is steadfast in exploring ways to reinforce its leasing strategies to meet the challenging demands of the Klang Valley office market,” he said.
Saw pointed out that with these on-going efforts coupled with a healthy weighted average lease expiry of 5.6 years, “we remain optimistic that MQReit’s portfolio of quality assets will continue to perform and correspondingly, MQReit would be able to deliver stable income distribution to unitholders for the second half of 2017”.
MQM chief executive officer Yong Su-Lin said despite the challenging office market environment, MQReit’s committed occupancy rate stood at 96.5% as at end June 2017.
“We will endeavor to maintain this healthy occupancy rate through active negotiations with tenants for the balance of the leases due in the second half of 2017. These negotiations are progressing as scheduled and we are confident in renewing the bulk of these leases,” she said.
MQM said the Trust has a healthy balance sheet with an aggregate gearing of 37.0% which is well below the Securities Commission regulatory limit of 50.0%, and a stable average cost of debt of 4.4% per annum as at June 30, 2017.
It added MQReit has no refinancing requirements in 2017. About 76% of the Trust’s borrowings are pegged at fixed rates, which offer greater certainty of interest expense in an event of a rising interest rate environment.
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