Wednesday 17 Apr 2024
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This article first appeared in The Edge Malaysia Weekly on September 18, 2023 - September 24, 2023

Atrium Real Estate Investment Trust (Atrium REIT), an industrial REIT, saw its share price almost double in the last three years, rallying from 74.2 sen as at end-March 2020 to RM1.17 a year later, and further to RM1.38 by end-March 2022. It closed at RM1.39 on March 31 this year — the cut-off date for The Edge Malaysia Centurion Club Corporate Awards 2023.

The share price gains translated into a three-year increase of 18.62%, based on the methodology for the awards, which placed the REIT at the top of its sector for returns to shareholders over the March 2020 to March 2023 period.

The gains also lifted Atrium REIT’s market capitalisation from RM235.32 million in FY2020 with 204.63 million units in circulation to RM350.1 million by the end of FY2022, while units in circulation expanded to RM255.55 million. By end-March this year, its market cap had further increased to RM369.1 million.

The share price rally corresponds with the group’s largely upward trending net income (realised) over the years, from RM11.12 million in FY2019 to RM18.79 million in FY2020, up about 69% from the previous year, followed by a 6.3% increase to RM19.97 million in FY2021. Realised net income then dipped by 7.4% to RM18.49 million in FY2022.

One of the REIT’s assets, Atrium Shah Alam 2 has a net lettable area of 259,933 sq ft

It remains one of the REITs with a strong profit after tax (PAT) or distributable income growth over the past few years, with a three-year compound annual growth rate of 18.5% from FY2019 to FY2022 — placing it as the second top-performing REIT in terms of PAT — as it added two more properties to its asset portfolio during the period under review, raising its total properties from six in 2019 to eight by end-FY2022. This raised its assets under management to RM542.8 million by end-FY2022, from RM410.3 million in FY2019.

It acquired a one-storey warehouse annexed to a two-storey office in the Bayan Lepas Industrial Park area in Penang for RM50.37 million in October 2020, followed by a two-storey warehouse in Shah Alam for RM45 million in February 2021. The newly acquired properties were named Atrium Bayan Lepas 1 and Atrium Shah Alam 4, respectively.

The acquisitions helped the group post stronger earnings, despite the Covid-19 global pandemic that impacted the domestic and global economies for over two years since 2020, as well as the four interest rate increases in 2022 that raised the overnight policy rate from its historic low of 1.75% to 2.75%.

“All the properties of Atrium REIT are strategically located in prime industrial areas and this has enabled a continuous and stable demand for our investment properties, such that Atrium REIT continues to enjoy a high occupancy rate. With the exception of Atrium Shah Alam 4 (ASA4, currently undergoing an asset enhancement initiative), the total occupancy rate of Atrium REIT as at Dec 31, 2022 is 100%,” the REIT’s Annual Report 2022 showed.

In tandem with the PAT increase, its distribution per unit rose from 6.63 sen in FY2019 to nine sen in FY2020, and further to 9.75 sen in FY2021, before dipping to 8.2 sen in FY2022.

For the first half of FY2023, Atrium REIT recorded a gross revenue of RM18.4 million, a slight increase of 5.8% compared to the previous corresponding period of RM17.4 million. Net income (realised) for the period increased by 1.7% to RM9.47 million from RM9.31 million previously, due to the higher gross revenue and other income.

“Gross revenue was higher due to the step-up in rental rates and the absence of rent-free amortisation adjustment during the current period, while other income was higher due to the higher funds deposited in the short-term money market and higher interest rates offered as compared to the previous corresponding period,” the company said in a filing to Bursa Malaysia.

On prospects, Atrium REIT said it is mindful of potential situations where supply could outpace demand, requiring prudent and decisive action to capitalise on or mitigate its impact.

“Given the strong performance of Atrium REIT over the last financial year and the proven resilience of the manager to adopt various strategies in pursuit of stable income and value creation, we are confident of facing the challenges head-on,” the manager said in its FY2022 annual report.

 Atrium REIT said it will continue to explore properties in ideal locations for potential acquisition. To achieve that, the manager is actively and consistently engaging real estate agents as well as business partners to identify potential properties with strategic locations, good tenants and attractive yields, it added.

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