Al-Aqar REIT announces 1.9 sen DPU despite 11% drop in 3Q net income

• Net rental income for the quarter declined 6.3% to RM27.27 million from RM29.09 million a year ago, amid a decline in contribution from both Malaysia and Australia segments.

KUALA LUMPUR (Nov 28): Al-Aqar Healthcare Real Estate Investment Trust's (Al-Aqar REIT) (KL:ALAQAR) net income fell 11% year-on-year to RM15.63 million in the third quarter ended Sep 30, 2024 (3QFY2024), following a drop in net rental income. 

Net rental income for the quarter declined 6.3% to RM27.27 million from RM29.09 million a year ago, amid a decline in contribution from both Malaysia and Australia segments.

The Malaysia segment contributed RM27.3 million of net rental income for the quarter, representing a decrease of 1.2% from RM27.7 million recorded in the preceding year's corresponding quarter.

"The decrease was mainly due to [the] disposal of Damai Care & Wellness Centre in June 2024," the healthcare and wellness centric REIT said in a filing with Bursa Malaysia on Thursday.

Meanwhile, the Australia segment recorded a net rental loss due to rental adjustment following the completion of the business sale agreement (BSA) by the lessee, Al-Aqar REIT said.

Al-Aqar REIT declared a third interim income distribution of 1.9 sen per unit, payable on Dec 31, bringing the total dividend declared year-to-date to 5.7 sen per unit, slightly lower compared with 5.9 sen per unit declared during the same period last year.

For the first nine months of FY2023, net income slipped 3.5% to RM48.4 million from RM50.18 million in the same period last year, while net rental income dropped 2.7% to RM83.27 million from RM85.53 million.

Al-Aqar REIT owns and manages hospitals, wellness and health centres, as well as healthcare colleges, mostly affiliated to KPJ. In Australia, its exposure is in one aged care and retirement village facility named Jeta Gardens in Brisbane.

However, the REIT announced in December 2023 that it is disposing of the land and buildings of Jeta Gardens Aged Care Facility for A$24.2 million (RM74.9 million) cash to Principal Healthcare Finance Pty Ltd. The disposal is still pending completion.

Going forward, Al-Aqar REIT said the expanded bed capacity and higher patient turnover in KPJ Healthcare Bhd (KL:KPJ), which it has long-term lease agreements with, indicate a strong foundation for stable and potentially growing rental income for its healthcare assets.

"As KPJ fills more beds and serves more patients, their revenue base becomes more solid, ensuring reliable and timely rental payments to Al-Aqar.

"This consistent income from KPJ’s improved operations supports Al-Aqar’s ability to maintain and potentially increase dividends to its shareholders," it said.

The REIT added that the proceeds from the sale of Damai Care & Wellness Centre and Jeta Gardens Aged Care Facilities will be used to either distribute to unitholders, acquire local healthcare properties to boost the fund’s yield, or a combination of both.

Al-Aqar REIT units fell two sen or 1.43% to close at RM1.38 on Thursday, giving it a market capitalisation of RM1.16 billion.

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