Thursday, November 12, 2020

MQREIT Becomes Analyst Choice

 Analysts updated the buy 'recommendation' to MRCB-Quill REIT (MQREIT) after the company achieved expected results in the third quarter ending 30 September 2020 (3QFY20).


According to CGS-CIMB analyst Sharizan Rosely in a note today, MQREIT revenue in the first 9 months (9MFY20) exceeded expectations, driven by strong net real estate income (NPI) margins.


He expects the negative portfolio risk in relation to changes in rents to be low for MQREIT as supported by a 90% renewable rental tax rate.


Sharizan explained that his party found that at the end of 3QFY20, the change in rent should be manageable and stable at a lower single positive figure in the financial year 2020 (FY20).


Although the government is re-implementing and extending the period of the Conditional Movement Control Order (PKPB), Sharizan believes the risk of MQREIT loss at 4QFY20 when providing rental assistance is minimal.


He said, only 4% of MQREIT locations are rented and all tenants are likely to be given rental assistance even at a smaller amount than 2QFY20.


Sharizan added that he increased the expected earnings per share or dividend per share of MQREIT for FY20 to FY22 by 13-20% after generating stronger rental income in the second half of FY20.


“The revised dividend per share (DPS) of 6.2 / 6.4 / 6.4 sen for FY20 / FY21 / 22F translates into an attractive dividend yield of 7.9-8.3%.


These results and 9MFY20 pushed our recommendation to MQREIT from ‘hold’ to ‘add’. "The target price based on our dividend discount model increased to 85 sen from 77 sen due to the high DPS forecast and 'rollover' towards the end of the 2021 calendar year (CY21)," he said.


Meanwhile, Kenanga Research analyst Marie Vaz maintained an 'outperform' recommendation for MQREIT with a higher target price (TP) of 82.5 sen compared to 80 sen.


He also increased the company's net profit by 7% for FY20 and FY21 by RM78 million to RM82 million.


In addition, Maybank Investment Bank Research analyst Kevin Wong also maintained a 'buy' recommendation with a TP of RM1.20, after the company met its expectations.


Wong explained that he predicted MQREIT would continue to drive positive growth driven by stable rental income from its long-term tenants.


Yesterday, MQREIT announced that the NPI for 3QFY20 increased by 9% to RM32.4 million compared to RM29.74 million in the same period the previous year.