Atrium REIT was listed on Bursa Malaysia on April 2007. To date, Atrium REIT’s property portfolio consists of 8 industrial properties located across Klang Valley and Penang. Being a REIT in the industrial sector, they are less impacted by the uncertainty of COVID-19 pandemic as compared to REITs in other sectors such as retail and hospitality. As such, they are one of the few REITs which has been grown positively despite COVID-19.
In this post, we will look at Atrium REIT FY21 Performance based on its latest annual report.
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1. Maintained 100% portfolio occupancy rate of its active assets
As at 31 December 2021, Atrium REIT reported 100% occupancy rate across its portfolio excluding Atrium Shah Alam 4 which is currently undergoing asset enhancement. The healthy occupancy rate is driven by the increase in demand spaces from various businesses. During the year itself, the management had managed to renew/find new tenants to replace 3 of its leases that had expired.
As at 31 December 2021, here is the current status of its lease expiry:
|Atrium Shah Alam 1||100%||Expiring on 31 May 2027|
|Atrium Shah Alam 2||100%||Expiring on 31 March 2024|
|Atrium Shah Alam 3||100%||Expiring on 24 July 2023|
|Atrium Shah Alam 4||0%||Undergoing major AEI which is expected to complete in Q4 2022.|
|Atrium Bayan Lepas 1||100%||Expiring on 21 October 2035|
|Atrium Bayan Lepas 2||100%||Expiring on 6 October 2034|
|Atrium Puchong||100%||Expiring on 30 September 2023|
|Atrium USJ||100%||Block A (31 August 2023), Block B (15 February 2024), Block C (31 July 2022)|
Atrium Shah Alam 4 which is currently undergoing major asset enhancement initiatives and currently untenanted will be occupied by Quantium Solutions International upon the completion of the AEI. In the shorter term, investors should pay close attention to Atrium USJ Block C which is due to expire in 31 July 2022.
2. Continuous growth in overall financial performance
|MYR in 000s||FY18||FY19||FY20||FY21|
|Net Property Income||17,257||21,413||32,238||36,413|
Both revenue and net property income has been on an increasing trend over the past 4 years. Revenue increased from MYR 34.4 million in FY20 to MYR 39.1 million in FY21. Net Property Income on the other hand increased from MYR 32.2 million in FY20 to MYR 36.4 million in FY21. This increase is mainly driven by Atrium Bayan Lepas 1 which was acquired in October 2020.
Atrium REIT has no doubt been resilient reporting solid growth despite the uncertainty of the COVID-19 pandemic.
3. Strong distribution per unit with a attractive yield
|Distribution Per Unit||8.1||6.6||9.0||9.8|
Looking at its distribution per unit, there is a dip in from 8.1 cents in FY18 to 6.6 cents in FY19. This dip is due to the enlarged share base from the placement and right issue issued in conjunction to the acquisition of Atrium Bayan Lepas 2.
Apart from the dip in FY19 which is due to timing differences in rental income recognition, distribution per unit has been growing steadily. Based on 31 December 2021 closing price, this would give investors a solid yield of 6.50% which is fairly attractive.
Read More: Why you should never buy a REIT just because they have a high dividend yield
4. Increasing gearing but within permissible limit
As at 31 December 2021, Atrium REIT has a total borrowings of MYR 255 million which translates to a gearing of 47.2% in FY21. While this is still below the permissible limit, the gearing has been increasing year on year due to its expansion. While growth is great, this is definitely an area that is worth keeping a lookout on.
Of its total loan, 100% of it is variable in nature. This can be both beneficial and adverse to a REIT. The downside of variable loans is that they are subject to interest rate risk. The positive aspect, on the other hand, is that a cut in interest rate would be favorable to them which is what they are experiencing at the moment
Based on our overall analysis, Atrium REIT FY21 performance has been fairly commendable. Despite the uncertainty of COVID-19, they have managed to maintain a 100% occupancy rate with strong growth in financial performance. Distribution per unit has been on an increasing trend giving investors a 6.5% yield despite trading a premium above its current NAV of MYR 1.26. From a price-to-book standpoint, Atrium REIT is trading at price to book ratio of 1.2.
What are your thoughts on Atrium 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.