PETALING JAYA: The impact of the Covid-19 pandemic is expected to be temporary for YTL Hospitality Real Estate Investment Trust (YTL REIT), with its business set to normalise once the crisis is over.
AmInvestment Bank Research, in a report yesterday, said YTL REIT has master leases on properties in Malaysia and Japan that provide steady incomes.
“At the current price, the stock offers a potential upside of over 20%. Maintain ‘buy’ on YTL REIT, ” it said.
The research house is, however, lowering its payout ratio to 90% from 100%, following management’s guidance.
“We make no changes to our 2021 and 2022 numbers while introducing 2023 distributable income forecasts at RM136.9mil.
YTL REIT’s 2020 financial year revenue fell by 13.1% year-on-year mainly due to travel restrictions in Australia, which have impacted the tourism and hospitality business in the country.
“However, this was mitigated by businesses in Malaysia and Japan which are largely unaffected due to their master lease arrangements, ” said AmInvestment Bank.
According to the research house, Malaysian properties contributed a revenue and net property income (NPI) of RM140.2mil and RM132.9mil respectively in its current financial year.
“The stronger revenue and NPI was mainly attributed to additional rentals recorded from JW Marriott Hotel KL following the refurbishment which was completed in mid-2019.
“Japanese properties’ 2020 revenue and NPI surged by 13.6% and 15.4%year-on-year respectively to RM28.7mil and RM24.1mil respectively, contributed by Green Leaf Niseko Village Hotel that was acquired in September 2018.”
However, Australian properties’ revenue and NPI tumbled 22.3% and 25.7% to RM257.6mil and RM78.3mil respectively, said AmInvestment Bank, mainly due to the impact of the Covid-19 outbreak that affected the global tourism and hospitality businesses.
“On a positive note, the Australian properties participated in the Australian government’s programme for self-isolation guests and remained in operations.”
The research house noted that YTL REIT’s debt-to-total assets ratio remains stable at 40% compared with 39% last year, as a result of higher investing activities, adding however that this was still below the regulatory threshold of 50%.
“At the current level, we believe YTL REIT still has some room to gear up for future acquisitions.”
Meanwhile, Maybank Investment Bank (Maybank IB) Research said it is raising its 2021 and 2022 net profit by 20% and 9% respectively, after mainly adjusting for the company’s 2020 results (namely foreign exchange, interest costs and selective cost savings from the rental variation adjustments) and Australian hotels’ earnings.
“Subsequently, we cut our 2021 and 2022 gross distribution per unit by 55% and 52% to 2.6 sen and 3.5 sen respectively, after accounting for the rental variation adjustments (namely lower distributable income) and lower dividend payout ratio of 90% per annum.”
For YTL REIT’s Australian hotels, Maybank IB said occupancies and earnings were largely attributed to guests that are undergoing mandated Covid-19 quarantine/ hotel isolation for 14 days upon entering the country.
“Positively, we understand that YTL REIT’s Australian hotels have remained among the preferred hotels for the isolation and we believe this would sustain its near term earnings, ” it added.
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