Lacklustre showing by three REITs

PETALING JAYA: The improved financial performance by two real estate investment trusts (REITs) - Axis REIT and AmFirst REIT - failed to excite investors as the local bourse turned sluggish in line with the weak regional markets yesterday.

An analyst with a local brokerage said sentiment remained largely cautious mainly due to the slower economic growth in the US, and recent weakness in regional markets.

Axis REIT, which reported a 44.6% increase in net profit to RM9mil for the three months ended March 31, saw its share price closing near a three-month high of RM1.80 yesterday.

The strong earnings also prompted the company to declare an interim income distribution of 0.75 sen per unit.

Despite the sterling results, however, the counter failed to attract investor interest as there only 100 shares were traded in the day.

However, AmFirst REIT came under mild profit taking to close four sen lower at 90 sen. A total 270,100 units were traded at prices ranging from 89.5 sen to 90.5 sen.

For the financial year ended March 31 (FY08), AmFirst REIT recorded net profit of RM31.3mil on revenue of RM57.8mil, compared with RM8.3mil and RM13.9mil respectively in FY07.

Analysts said AmFirst REIT’s results outperformed its forecast in its listing prospectus.

Meanwhile, Hektar REIT also announced its first quarter results on Monday, reporting a lower net profit of RM8.7mil against RM11.2mil in the previous corresponding quarter while revenue fell to RM18.8mil from RM23.6mil.

It closed one sen down to RM1.39 on total volume of 11,200 shares.

Despite the weaker set of earnings, Hektar REIT expected its earnings to be enhanced by its acquisition of an integrated retail development in Muar, Johor, for RM117.5mil in February.

On the performance of Axis REIT, Aseambankers Equity Research said its first-quarter results were in line with market consensus but came in above the brokerage’s expectations. It added that the results reflected the full quarter’s contribution from properties acquired in the fourth quarter last year.

“For the rest of 2008, we anticipate an even better performance with three more acquisitions pending completion, namely Delfi Cocoa factory in Pasir Gudang, Johor, worth RM12.5mil, and two factories occupied by Celestica (AMS) in Senai worth RM27mil in total,” Aseambanker said in the report.

Due to Axis REIT's strong results, Aseambankers raised the REIT's financial year ending Dec 31 (FY08) and FY09 distribution income estimates by 13.1% and 8.3% respectively.

The revision includes a maiden contribution from the Celestica factories effective Oct 1, amounting to RM1.2mil in incremental yearly profits for unit holders.

As for Hektar REIT, analysts said further scrutiny revealed that its outlook was not as bleak as its results portrayed as the group was involved in a few acquisitions during the quarter.

By The Star (by Leong Hung Yee)