AmFirst Real Estate Investment Trust or also known as AmFirst REIT is a Malaysia-based REIT that invests primarily in commercial assets with some diversification into retail assets. They were listed in December 2006 and as at 31 March 2021, they had assets under management of approximately MYR 1.6 bil consisting of 9 properties.
| Properties | Location | RM in mil | % |
| Bangunan AmBank Group | Kuala Lumpur | 266 | 16% |
| Menara AmBank | Kuala Lumpur | 322 | 20% |
| Menara AmFirst | Petaling Jaya | 66 | 4% |
| Wisma AmFirst | Kelana Jaya | 118 | 7% |
| The Summit Subang USJ | Subang Jaya | 357 | 22% |
| Prima 9 | Cyberjaya | 73 | 4% |
| Prima 10 | Cyberjaya | 66 | 4% |
| Jaya 99 | Melaka | 104 | 6% |
| Mydin Hypermall | Bukit Mertajam | 256 | 16% |
| Total | 1,628 | 100% |
Despite owning 9 properties, 4 out of 9 of its properties make up 74% of its overall composition. These are The Summit Subang USJ, Mydin Hypermall, Menara Ambank and Bangunan Ambank Group. The heavy concentration can be unfavorable if there is any negative outlook on them. Hence, let’s dive deeper into Amfirst REIT FY21 performanace to see how it has performed.
1) Declined in overall portfolio occupancy
In FY21 itself, there has not been much developments in regards to Amfirst REIT. The properties composition of Amfirst REIT is still the same as per the prior financial year. Looking at its overall occupancy rate, it has declined slightly from 84.9% from FY20 to 81.2% in FY21. There has been a mix in performance from its individual portfolio with properties such as Menara Ambank, Mydin Hypermall and Prima 10 achieving an increasing or stable occupancy rate.
What caught our attention is the performance of Prima 9 which has declined from 100% in FY20 to 41.7% in FY21. This is no doubt bad for Amfirst REIT given the huge drop. Despite the huge drop, the positive aspect is that Prima 9 only contributes c.4% of the total income of Amfirt REIT.
If we were to look at the top 4 properties that contribute close to 74% of the overall composition, almost all the properties achieved a stable or an increase in occupancy rate with the exception of The Summit Subang USJ. Both the retail and office part of The Summit has suffered a slight decline in occupancy rate which is not surprising given the overall uncertainty of COVID-19.
2. Dropped in both revenue and net realised income
| MYR in 000s | FY19 | FY20 | FY21 |
| Revenue | 121,229 | 120,682 | 107,303 |
| Net Property Income | 79,942 | 76,565 | 64,969 |
| Net Income – Realised | 28,205 | 25,493 | 21,513 |
Given the overall drop in occupancy rate in FY21, it comes to no surprise that the financial performance of Amfirst REIT has declined slightly as well. Revenue has declined from MYR 120.7 mil in FY20 to MYR 107.3 mil in FY21. Likewise, net property income has declined from MYR 76.6 mil in FY20 to MYR 65.0 mil in FY21.
The decrease was mainly due to the rental rebate given on a case-by-case basis to tenants impacted by COVID-19 pandemic. In addition to that, the lower average occupancy of Prima 9, Wisma AmFIRST, Jaya 99, The Summit Retail as well as lower monthly rental income from The Summit Hotel has resulted in the overall drop in financial performance.
3. Declining distribution per unit (DPU)
| FY19 | FY20 | FY21 | |
| Distribution Per Unit | 4.00 | 3.35 | 2.82 |
Distribution per unit on the other hand has declined from 3.35 cents in FY20 to 2.82 cents in FY21. This is in line with the overall decline seen from the overall operational and financial performance. The uncertainty of COVID-19 pandemic will likely affect Amfirst REIT performance in the short to medium term. Based on its closing traded price as at 31 March 2021 of MYR 0.43, this would give investors a yield of 6.5%.
We will let you decided if this is worth investing in.
Read More: Why you should never buy a REIT just because they have a high dividend yield
4. High Gearing level close to the permissible limit
| FY19 | FY20 | FY21 | |
| Gearing | 47.3% | 47.6% | 48.7% |
Last but not least, let’s dive into the debt profile of Amfirst REIT. An area which we do not like about is its increasing gearing from 47.6% in FY20 to 48.7% in FY21. Despite the gearing being within the permissible revised limit of 60%, this is without a doubt fairly high of which the REIT manager would need to be vary of any future acquisition and asset enhancement plan.
Of its total borrowings, 100% of its debt is floating rate in nature. What this means is that Amfirst REIT is subject to interest rate risk. Having said that, Amfirst REIT would benefit in the short term from the current low cost of fund.
Summary
From our overall analysis, AmFirst REIT FY21 performance has been affected by COVID-19 uncertainty. Its gearing has increased year on year while distribution per unit has been on the decline. With the uncertainty of COVID-19 pandemic, we would expect the performance to be uncertain in the short term.
What are your thoughts on AmFirst REIT FY21 performance? If you are just getting started, feel free to read more of our REIT Guide and REIT Analysis. You can also read more about what REITs are if you are new to REITs.
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