Stock Review – ALAQAR (5116) (AL-AQAR HEALTHCARE REIT)

Bursa Malaysia - 5116
Bloomberg - AQAR:MK
Yahoo - 5116 .kl
Webpage - http://www.alaqar.com.my/

Sector : Real Estate Investment Trust

Sub Sector : Real Estate Investment Trust

Focus : Healthcare

Company Profile:

ALAQAR is managed by Damansara REIT Managers Sdn Bhd, a wholly-owned subsidiary of Johor Corporation Group (JCorp) and support by KPJ Healthcare Berhad.

As of December 2019, ALAQAR consists of 23 properties comprising of 17 hospitals, 3 wellness/ healthcare centres, 2 colleges and 1 aged care and retirement village. One of them is located in Queensland Australia.

Properties:

a) Hospitals

Property Name	Location	Tenancy Expiry	Rental / GFA (2018)	Rental / GFA (2019)
KPJ AMPANG PUTERI SPECIALIST HOSPITAL	Ampang, Selangor	June 2021	24.95	25.45
KPJ DAMANSARA SPECIALIST HOSPITAL	Petaling Jaya, Selangor	June 2021	19.25	19.64
KPJ JOHOR SPECIALIST HOSPITAL	Johor Bharu, Johor	June 2021	17.45	17.66
KPJ PUTERI SPECIALIST HOSPITAL	Johor Bharu, Johor	June 2021	23.69	24.16
KPJ SELANGOR SPECIALIST HOSPITAL	Shah Alam, Selangor	June 2021	18.01	18.37
KPJ IPOH SPECIALIST HOSPITAL	Ipoh, Perak	June 2021	13.99	14.11
KPJ PERDANA SPECIALIST HOSPITAL	Kota Bharu, Kelantan	February 2020	22.02	22.46
SENTOSA MEDICAL CENTRE	Kuala Lumpur	June 2021	24.41	24.90
KPJ KAJANG SPECIALIST HOSPITAL	Kajang, Selangor	February 2020	17.45	17.80
KEDAH MEDICAL CENTRE	Alor Setar, Kedah	February 2020	17.33	17.68
KPJ PENANG SPECIALIST HOSPITAL	Bukit Mertajam, Pulau Pinang	October 2021	25.69	25.26
KPJ TAWAKKAL SPECIALIST HOSPITAL	Kuala Lumpur	July 2022	25.44	25.69
KPJ SEREMBAN SPECIALIST HOSPITAL	Seremban, Negeri Sembilan	October 2024	26.08	26.77
TAIPING MEDICAL CENTRE	Taiping, Perak	April 2021	17.75	17.87
KLUANG UTAMA SPECIALIST HOSPITAL	Kluang, Johor	January 2021	9.30	9.49
KPJ KLANG SPECIALIST HOSPITAL	Klang, Selangor	June 2021	20.63	20.60
KPJ BATU PAHAT SPECIALIST HOSPITAL	Batu Pahat, Johor	December 2022		0.15

 b) Wellness / Healthcare Centre

Property Name	Location	Tenancy Expiry	Rental / GFA (2018)	Rental / GFA (2019)
KUANTAN WELLNESS CENTRE	Kuantan, Pahang	June 2021	20.38	20.79
DAMAIN WELLNESS CENTRE	Kota Kinabalu, Sabah	June 2021	25.15	20.72
TAWAKKAL HEALTH CENTRE	Kuala Lumpur	May 2021	26.22	26.74

c) College 

Property Name	Location	Tenancy Expiry	Rental / GFA (2018)	Rental / GFA (2019)
KPJ HEALTHCARE UNIVERSITY COLLEGE, NILAI	Nilai, Negeri Sembilan		9.68	15.68
KPJ INTERNATIONAL COLLEGE, PENANG	Bukit Mertajam, Pulau Pinang	October 2021	27.84	26.64

d) Aged and retirement village

Property Name	Location	Tenancy Expiry	Rental / GFA (2018)	Rental / GFA (2019)
JETA GARDENS AGED CARE & RETIREMENT VILLAGE	Queensland, Australia		9.68	15.68

 

Fee

ALAQAR maintenance fee had increase from RM 599,810 in 2016 to RM 2,113,889 in 2019 which is Compound annual growth rate of 37.01 %. This made the maintenance fee / rental increase from 0.61 % to 2.11 %.

For the year 2009 to 2019, the management fee is range 1.40 % – 2.36 % of total rental income while the total fee is range  2.47% - 4.41 %.

Income

From the chart above, the gross income for ALAQAR had drop significantly in 2016 and slight more in 2017. This is because of disposal of Rumah Sakit Bumi Serpong Damai and Rumah Sakit Medika Permata Hijau from Indonesia in 2016 and further disposal of Selesa Tower, Johor Bharu in 2017.

However there is an increase in nett income in 2017 and 2018, this is mainly because of higher gain on fair value on investment properties which is RM 24,791,923 and RM 30,341,920 which is paper gain. The REIT does not have any benefit from the gain on fair value on investment properties besides increase the value of asset. ALAQAR also had to pay more tax due to the profit recorded in the income statement. The same go to year 2011 where the nett profit is higher than the gross profit. In 2011 ALAQAR recorded fair value gain of RM 38,794,262.

Market Capitalisation vs Nett Asset

From the chart, ALAQAR had trade at a premium during 2012 to 2017.

Dividend

Over the past  year 2010 to 2019, ALAQAR had pay to shareholder an average dividend of 7.51 sen which is 5.73 % of the today price 1.31 (i November 2020).

Convid 19

During the pandemic, ALAQAR had provide assistance to its tenants in the form of rental rebate. From the quarter report for financial end 30 June 2020, the gross revenue from the first six month of 2020 had decrease by 6.4 % compared to first 6 month of 2019 besides that the property expense had increase by 10 %.

Besides that the trust expense had also increase by 5 % compare to the first 6 months of 2019. The net earning per share for the first 6 month had reduce from 4.24 sen in 2019 to 3.54 sen in 2020  which is 16.5 % decrease.

With the government of Malaysia declare Conditional MCO in Sabah, Selangor, Kuala Lumpur, Putrajaya and recently Johor Bharu, these would further affect the tenant of ALAQAR. Further discount on the rental rate might be given to the tenants.

Market Research

MIDF AMANAH INVESTMENTBANK BHD (1 September 2020)

Price Target : RM 1.42

• 1HFY20 earning below expectation
• Earning weight by rental rebate
• Earning drag by higher financial cost
• Earning forecast reduce

IVKLS Value

1.06

Summary of Stock Reviews

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Stock Review – ARANK (7214) (A-RANK BHD) - 2

Bursa Malaysia - 7214
Bloomberg - ARNK:MK

Yahoo - 7214 .kl
Webpage - https://www.arank.com.my/

Sector : Industrial Products and Services

Sub Sector : Metals
Focus : Aluminium

Company Profile:

ARANK is principally involved in manufacturing and marketing of aluminium billets. ARANK is currently the largest manufacturer and supplier of aluminium billets in Malaysia and one of Asia’s leading suppliers of aluminium extrusion billets.

Revenue:

Below is the revenue and operating margin of ARANK.

5 Years Annualise Growth of Revenue	-0.21 %
10 Years Annualise Growth of Revenue	3.53 %

ARANK revenue had slow down for the past five year compare to the previous 10 years. Despite lower revenue ARANK operating margin had increase from around 2.5 % before 2016 to 3.5 % in 2019.

Nett Profit

Bar Chart below shows ARANK nett profit from 2010 – 2019.

5 Years Annualise Growth of Nett Profit	2.61 %
10 Years Annualise Growth of Nett Profit	16.22 %

Year 2016 recorded the highest nett profit growth of 53 % mainly due to higher profit margin.

In 2017 ARANK had dispose 55 % of Hong Lee Group Sdn Bhd with a total cash consideration of RM 2,105,400 which ARANK had acquired in 2013.

Assets and Liabilities

ARANK asset grows over the period of 2010 to 2019. Besides that it liabilities also reduced over the period.

Trade Receivables

Prior 2014 there is no trade receivable past due. ARANK impaired all their trade receivable past due. Between 2015 to 2019 ARANK trade receivables past due is between 10% to 20 %.

Financial Ratio

There would be few financial ratios to be look at here:

1) Interest Coverage Ratio (Green Bar Chart)

2)  Cash Ratio (Blue Line Chart)

3)  Current Ratio (Red Line Chart)

1) Interest Coverage Ratio

Interest coverage ratio measure how capable the company pay off the existing debt. With an interest coverage ratio above one mean the earnings before interest & tax (EBIT) is able to pay of the full amount of the financial cost of the year.

ARANK had interest coverage ratio more than one for the past 10 years. In 2017 ARANK interest coverage ratio is at 35 which is the highest and drop to 12 in 2019.

2) Cash Ratio

As cash is the most liquid assets of the company, cash ratio is use to determine company ability to pay off short term liabilities using cash. Cash ratio above one indicates that company able to settle all current liabilities using available cash.

ARANK had low cash ratio from 2010 to 2018, however in 2019 the cash ratio is above 1 for the first time over the last ten years.

3) Current Ratio

Current ratio measures ability of the company to pay off short term obligation (current liabilities). Current ratio above one means the company able to pay off the current liabilities with current asset.

Despite low cash ratio, ARANK current ratio is above from 2011 onward.

Turnover in Days

Let look into three types of turn over as follow:

1)  Inventory Turnover (Blue Line)

2)  Trade Receivables Turnover (Red Line)

3)  Trade Payable Turnover (Green Line)

1)  Days Sales of Inventory

10 Years Days Sales of Inventory Median (days) – 28.23

ARANK days sales of inventory had increase from 26.55 days in 2010 to 44 day in 2018 before drop to 33. ARANK inventories had took longer time to sell out compared to 2010.

2) Trade Receivable Turnover (Days)

10 Years Trade Receivable Turnover (Days) – 24.36

ARANK trade receivable turn over had also increase from 10 days in 2010 to 24 days in 2019. ARANK took longer time to collect back the debt.

3)  Trade Payable Turnover (Days)

10 Years Trade Payable Turnover (Days) – 4.33

ARANK had very low trade payable turnover which means it pay it debtor 6 times faster than collect back from creditors.

Per Share Analysis

1)  Earnings per share (sen) (Blue Bar)

2)  Dividend per share (sen) (Red Bar)

3)  Net total assets per share (Green Line)

1)  Earnings per share

Other thank year 2016 and year 2017 ARANK had quite consistence earning per share around 8 sen.

2)  Dividends per share

ARANK had consistence dividend per year of 3 sen. ARANK had issue bonus shares twice over the past 10 years. 1:2 Bonus in year 2012 and 2:5 bonus in year 2019.

3)  Net total assets per share

There is a significant drop in net asset per share in 2016 and 2017 due to impaired the goodwill of Hong Lee Group Sdn Bhd in 2016 and disposal of Hong Lee Group Sdn Bhd in 2017.

Director’s Remuneration

Some company paid high remuneration to director despite low profit. Let see how much is ARANK director’s remuneration in comparison to staff fee and operating profit.

There is slightly higher director remuneration expense in 2016 and 2017 where the nett profit of the companies is high.

Datuk Leow Chong Hwa, major shareholder of ARANK is also major shareholder of LBALUM and City Data Limited via his spouse.

ESOS and Warrant

Five years ESOS from 27 August 2018 until 26 August 2023 are granted to the eligible employees and director at 0.65.

As of 31^st July 2019 ARANK granted 10,492,400 options to eligible director and employee. The option price had adjusted to 0.46 due to bonus issue on 18 January 2019.

Material Ligation

ARANK had no material ligation as of 30^th April 2020.

Return on Equity

Return of equity can be calculated through Du Point Analysis which uses:

• Net Profit Margin to measure operating efficiency, how much money gets out from its revenue
• Asset Turn Over to measure asset efficiency, how effective the company make use of its asset
• Equity Multiplier measure of financial leverage.

5 Years Return on Equity Average	12.08 %
10 Years Return on Equity Average	11.53 %

ARANK equity multiplier had decrease over the period from 2010 to 2019. While asset turnover and net profit margin remain almost constant except in 2016 and 2017 which see increase in net profit margin which increase the return on equity to above 14 %.

Altman Z Score

Companies with Altman Z score < 1.8 is likely headed for bankruptcy while Z score > 3 is unlikely headed for bankruptcy.

ARANK Altman Z-Score above 3 hence unlikely to headed for bankruptcy.

Summary of Stock Reviews

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