AmanahRaya REIT: Leaner and Stronger than Ever, Shares Trading at Discount

AmanahRaya Real Estate Investment Trust (AmanahRaya REIT) has delivered an impressive performance for the third quarter of FY2024, showcasing the benefits of its proactive strategies in (i) streamlining assets, (ii) improving occupancy, and (ii) reducing costs.

Despite these positive developments, the REIT’s share price, currently at RM0.39, remains at a significant discount to its Net Tangible Asset (NTA) value of RM1.27 per unit—a glaring opportunity for investors seeking stable returns and potential upside.

For the quarter ended 30 September 2024, AmanahRaya REIT reported a 6.3% increase in rental revenue to RM18.8 million compared to RM17.7 million in the same quarter last year. Net Property Income (NPI) also grew by 5.3% year-on-year to RM12.1 million, while net realised income before taxation surged by a remarkable 160.5% to RM3.1 million.

This jump was mainly attributed to lower trust expenses and reduced borrowing costs after the REIT redeemed RM78.0 million in loans and medium-term notes.

The key driver behind these results is the strategic focus on improving occupancy rates and optimising asset performance. For example, Vista Tower, a key asset in AmanahRaya’s portfolio, saw its occupancy rate climb to 58.0% from just 35.5% a year ago.

This improvement came on the back of six new tenants who began leases during the quarter, contributing an additional RM0.6 million in monthly rental income. With three more tenants expected to sign on by year-end, the outlook remains positive for further revenue growth.

Similarly, Selayang Mall benefitted from active marketing efforts, attracting 10 new tenants this year and boosting the tenant count to 173 (up from 163 in 2023). Alongside renewals and rental increments from 41 existing tenants, Selayang Mall added a steady flow of recurring income, further improving the REIT’s cash flow.

AmanahRaya REIT’s management is taking significant steps to optimise its asset structure. The planned divestment of Contraves, valued at RM42.5 million, will generate additional cash flow, allowing the REIT to reinvest in higher-yielding assets and reduce its gearing level. This move is not only about balance sheet flexibility but also about positioning the REIT for future growth.

The acquisition of Sekolah Tinta, an education asset in Glenmarie secured on a long-term lease, further adds to AmanahRaya REIT’s stable income base. The education sector is known for its resilience, and this acquisition aligns with the REIT’s strategy to expand into stable, long-term cash flow properties.

The REIT’s average occupancy rate, which currently stands at 75.0%, is also expected to rise to 80.0% by the end of FY2024, driven by strong leasing activity at key assets like Vista Tower and Dana 13.

With a cash balance of RM43.3 million and an undrawn financing facility of RM400 million, AmanahRaya REIT’s liquidity remains strong, providing the financial flexibility to pursue growth opportunities. Yet, despite these improvements, the REIT’s share price remains at RM0.39, far below its NTA of RM1.27.

This steep discount highlights a compelling opportunity for investors to gain exposure to a REIT that is actively strengthening its portfolio while delivering stable income.

The REIT’s resilience, demonstrated by its proactive asset management and cost reductions, positions it well to deliver sustainable growth. With key assets like Vista Tower and Selayang Mall showing steady improvement and new acquisitions like Sekolah Tinta adding to its income stream, AmanahRaya REIT is on track for a stronger performance in the quarters ahead.

For investors seeking value, the current share price offers a rare opportunity to enter at a steep discount relative to the REIT’s underlying asset value. As the REIT continues to streamline its operations and drive occupancy higher, the gap between the market price and NTA could narrow, potentially rewarding those who take a long-term view.

In short, AmanahRaya REIT’s efforts to become leaner, more efficient, and more tenant-focused are paying off. With solid financials, new growth opportunities, and a clear strategy to unlock value, now may be an ideal time to pay attention to this overlooked gem.