Hektar REIT has demonstrated upside potential with yield improvement from new tenants raising the average occupancy rate to 92% by end of 2024, coupled with rent contribution of the newly-acquired Kolej Yayasan Saad, reported AmInvestment Bank Bhd.
The occupancy rate of Hektar’s assets has been stable at 87.2% in the first and second quarter of 2024. Moving ahead, new tenants have been acquired for Subang Parade, Mahkota Parade, Central Square and Segamat Central. These new tenants will be opening for business in the second half of 2024, consequently increasing the overall average occupancy rate of its malls to 92% by year-end.
Hektar REIT derives most of its rental income from the six shopping malls with a stable occupancy rate of 87.2%, as of the second quarter of 2024.
Meanwhile, the acquisition of Kolej Yayasan Saad has secured a 30-year lease agreement with a 2.5% escalation in rent per annum, giving an effective yield of 8% over the lease period. The diversification into education asset provides a stability in rental income over a longer lease period compared to shopping malls.
An improvement in the unit price is expected given the rise in occupancy rates of Hektar REIT’s existing shopping malls with new tenants. Also, Kolej Yayasan Saad will start to contribute to gross revenue with a steady yearly rental increment of 2.5% throughout the 30-year lease period.
Analysts have maintained their BUY call for Hektar REIT with the revised target price to RM0.86 from RM0.64, after incorporating higher occupany rates for Hektar REIT’s assets, with reference to the stock’s 52-week high of RM0.73 and low of RM0.50. Also, the revised valuation has taken into consideration a 3% premium from an unchanged 4-star ESG rating.
As at 10:56am Nov 12, Hektar REIT traded at RM0.54, up by one and a half sen from its closing of RM0.525 on Monday. (Stock updates from Bursa Malaysia)
According to market analysts, Hektar REIT’s management is focused on three-pronged strategy which includes portfolio optimisation to unlock the value of its existing property mix, increasing yield on assets, and lastly, optimising capital by reducing borrowing cost through diversification of debt sources
New Tenants
New tenants (The Farm, Oriental Parade, Game-On and Padi House) secured for Subang Parade will occupy a total floor area of 40,266 sq ft.
Meanwhile, Mahkota Parade will see new tenants, Chagee, Dubuyo and Moto Guzzi, leasing a total floor space of 3,752 sq ft, eventually lifting the occupancy rate of the mall to 97.4% from 95%.
For Central Square mall in Kedah, new tenant WonderPark occupying a substantial area of 31,314 sq ft has been secured, and this will improve the mall’s occupancy rate to 90.4% by end 2024.
In Johor, Segamat Central will see the opening of The Store occupying a space of 22,425 sq ft, thus raising the asset’s occupancy
rate to 88.6% from 75.9%.
Hektar REIT is Malaysia’s first retail-focused REIT with a portfolio of seven assets including six shopping malls and one education asset. The six shopping malls are namely Subang Parade, Mahkota Parade, Wetex Parade, Central Square, Kulim and Segamat Central. Hektar REIT recently completed the acquisition of Kolej Yayasan Saad in July 2024, and this has raised the value of total asset under its management to RM1.38 billion from RM1.23 billion.
