KUALA LUMPUR: AmInvestment Research has maintained its Buy recommendation on YTL Hospitality REIT
with a higher fair value of RM1.39/unit from RM1.37/unit, following a results briefing on Thursday.
In its Friday research note, AmInvestment Research said it is taking into account higher occupancies for the REIT in Sydney, Melbourne and Brisbane.
"We make slight changes to our DPU by - 0.25%/0.45%/-0.97% to 8.0 sen/8.60 sen/8.80 sen in FY18F/FY19F/FY20," it said.
"For Melbourne and Sydney, we increased our average daily rental (ADR) by 5% but reduced our ADR assumption in Brisbane as the management is prioritising its market share. Nevertheless, we expect the Brisbane Marriott to enjoy higher occupancy in FY18 due to Commonwealth Games 2018 in Gold Coast which to be held in April."
Revenue came in at RM111.1mil for Q4FY17, which brought the full year total to RM449.6mil, which was a 5.5% increase on-year and 104.9% of AmInvestment Research's full-year estimates.
"Its solid revenue growth was attributed to a step-up lease rental income from The Residences at Ritz-Carlton and other Malaysian properties (except for the JW Marriott Hotel KL) and the appreciation of the Australian dollar," it said.
YTLREIT reported a distributable income of RM32.9mil for Q4FY17, which was 16.1% higher on-year, owing to higher rental reversion, cost savings from interest and the strengthening Australian dollar.
It also reported a DPU of 1.93 sen from 2.14 sen in the previous corresponding quarter owing to a dilution in share placement. DPU in FY17 was 8.08 sen compared to 7.89 sen in FY16.
Net property income (NPI) came in within expectation at 96.3% of full-year estimates of RM217.7mil.
"The NPI was +0.8% y-o-y but -16.9% q-o-q in Q4FY17 due to a one-off higher land tax in Melbourne. Nevertheless, the management is in the midst of appealing the issue with the authority.
"As a result, Q4FY17 registered a blended NPI margin of 42.9% (Q3FY17: 48.5%). The NPI margin of Australian operation as at Q4FY17 has declined to 24.37% (3Q17: 33.8%). We expect the margin to normalise in the next quarter," the research house said.
It added that it expects YTLREIT to continue to grow organically owing to healthy rental reversion.
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