4QFY21 above expectation
Maintain SELL
4QFY21 core earnings were above expectations, at 110% of our FY21E. ALSREIT also declared a final gross DPU of 1.8sen (FY21: 2.30sen). The marginal discrepancies vs. expectations were mainly due lower property operating expenses. We make minor changes to our FY22 forecast (-5%). Our DDM-TP is marginally reduced by 1 sen to MYR0.42 (Ke: 9.5%) after rolling forward valuation to FY22E. We prefer Axis (AXRB MK, BUY, TP: MYR2.30, SP: MYR1.87).
Earnings remain weak, dragged by retail assets
4QFY21 core net profit increase marginally to MYR4.4m (+37% YoY), bringing FY21 core earnings to MYR14.6m (flat YoY). Despite that, revenue for the quarter declined 13% YoY mainly due to its retail segment (-24%), stemming from lower rental, parking and advertising income. Its key KOMTAR JBCC mall’s 4Q21 occupancy has eased by 10ppt YoY to 47%. Nevertheless, the earnings was partly cushioned by lower property operating expenses (-33% YoY) e.g. utilities cost.
Minor changes to forecasts
We make minor changes to our FY22E earnings (-5%), after incorporating FY21 actual. We expect earnings for its retail assets, namely Komtar JBCC to remain weak due to continued closure of the Malaysia- Singapore border, which negatively affects the footfall and tenant sales. We also introduce our FY24E forecasts.
Some rental stability, but limited growth catalyst
We continue to favour ALSREIT’s long-term and triple net lease assets, which will provide stable rental income, i.e. MCHM College, QSR properties and Mydin Hypermarket Gong Badak. These assets collectively contribute c.65% to our FY22-24E NPI. Elsewhere, end-FY21 gross gearing was a high 0.51x.