9 Key Things To Know About MRCB-Quill REIT

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MRCB-Quill REIT (MQREIT) was originally listed as Quill Capita Trust on 8 January 2007. At that time, it had an initial portfolio of 4 properties valued at RM 276.0 million.

In 2015, Malaysian Resources Corporation Bhd (MRCB), a Malaysian-listed construction and property development company has emerged as MQREIT’s largest shareholder. This is because Quill Capita Trust had issued additional units to acquire the Platinum Sentral from MRCB. As such, the name of the trust was changed to MQREIT to reflect MRCB as the major shareholder of the trust presently.

As at 30 September 2017, MQREIT has 11 properties in its portfolio valued at RM 2.22 billion. In this article, I’ll share 9 quick facts that you need to know about MQREIT before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: MQREIT / KLSE: 5123
Market Capitalization: RM 1.31 Billion (16 December 2017)

Share Price: RM 1.23 (16 December 2017)

Industry: Reit

Syariah Compliant: No

#2: The Business

MQREIT’s properties are located in 3 different locations. They are:

  1. Klang Valley
    MQREIT has 6 properties located in the Klang Valley. They include Wisma Technip, Quill Building 5 – IBM, Quill Building 8 – DHL XPJ, Platinum Sentral, Menara Shell and part of Plaza Mont Kiara. As at 30 September 2017, they are valued at RM 1.76 billion, accounting for 79.1% of MQREIT’s valuation of its property portfolio.

  2. Cyberjaya
    MQREIT has 4 properties located in Cyberjaya. They include Quill Building 1 – DHL 1, Quill Building 4 – DHL 2, Quill Building 2 – HSBC, and Quill Building 3 – BWM. As at 30 September 2017, they are valued at RM 324.7 million, accounting for 14.6% of MQREIT’s valuation of its property portfolio.

  3. Penang
    MQREIT has 1 property in Penang namely Tesco Building Penang. As at 30 September 2017, it is valued at RM 140.0 million, accounting for 6.3% of MQREIT’s valuation of its property portfolio.

#3: The Financials

From 2011 to 2014, MQREIT has maintained gross revenue and realised net income at RM 65 – 70 million and RM 34 – 35 million a year respectively as it has maintained its portfolio at 10 properties without acquiring and disposing a single piece of investment property.

In 2015, MQREIT has acquired Platinum Sentral for RM 740 million and has divested Quill Building 10 – HSBC for RM 27.3 million. Despite maintaining its number of properties at 10, the portfolio size has increased significantly as the Platinum Sentral is more valuable than Quill Building 10 -HSBC.

In 2016, MQREIT has acquired Menara Shell for RM 640 million. Thus, with the addition of 2 major properties, MQREIT has increased its gross revenue from RM 70 million levels in 2014 to RM 136.7 million in 2016. Realized net income has grown RM 34.2 million in 2014 to RM 59.2 million in 2016.

As the acquisition of both properties (Platinum Sentral and Menara Shell) involved issuance of additional MQREIT’s units, MQREIT has maintained its distribution per unit (DPU) at 8.30 – 8.50 sen a year over the last 5 years.

Source: Annual Report 2016 of MQREIT

Source: Annual Report 2016 of MQREIT

#4: Major Acquisitions

As at 30 September 2017, there is no announcement or proposal of any major acquisition or disposal of investment properties by MQREIT.  

#5: Lease Profile

As at 30 September 2017, MQREIT is enjoying a 96.6% in occupancy rate for its portfolio. It has a well-balanced tenancy mix where 30.8%, 18.6%, 14.4%, 11.5%, and 8.5% of its tenants are involved in the oil & gas, retail, government linked office, logistics, and banking industry respectively.


Source: Corporate Presentation Q3 2017 of MQREIT

As at 30 September 2017, 60% of its lease agreements will expire in 2019 onwards. This adds to income visibility to MQREIT over the mid-to-long term.

Source: Corporate Presentation Q3 2017 of MQREIT

#6: Valuation

As I write, MQREIT is trading at RM 1.23 a unit.

As at 30 September 2017, MQREIT has reported to have RM 1.28 in net asset value a unit. Thus, its current P/NAV works out to be 0.96.

MQREIT adopts a distribution policy to declare and pay out at least 90% of its distributable income on a half-yearly basis. For the 1st half of 2017, MQREIT has paid out 4.23 sen in DPU.

If MQREIT is able to maintain its DPU at 4.23 sen for the next 2 half yearly distributions, it would pay out 8.46 sen in DPU. As such, its gross dividend yield is expected to be 6.88%. For individual investors, it is prudent to deduct 10% withholding tax from 7.61 sen when calculating your net dividend yield, as such, I would expect net dividend yield to be 6.19%.

#7: Debt Profile

As at 30 September 2017, MQREIT has recorded RM 854.2 million in total borrowings. Its debt works out to be 37.4% of MQREIT’s total asset value of RM 2.28 billion, thus, is in line with its intention to maintain below 50% in debt-to-total assets. The average cost of debt is 4.4%.

#8: Investor Relations

For further enquiries or to request for additional investment information on MQREIT’s Investors Relation matters, you may contact:

Joyce Loh

Designation: Senior Manager

Email: joyce.loh@mrcb.com

Telephone: (603) 2859 7175

Website: http://www.mrcbquillreit.com/investor-relations/

#9: Major Shareholders

As at 31 December 2016, the substantial shareholders of MQREIT are:

– Malaysian Resources Corporation Bhd: 27.89%

– CapitaCommercial Trust: 10.96%

– Employees Provident Fund Bhd: 7.00%

– Quill Group of Companies: 10.38%*

– Amanah Saham Malaysia: 2.83%
Note:

Quill Group of Companies includes shareholdings such as Quill Land Sdn Bhd, Quill Estates Sdn Bhd, and Quill Properties Sdn Bhd. Dato’ Michael Ong and Dato’ Dr. Low Moi Ing are founders of the Quill Group and thus, are substantial shareholders of MQREIT. Both Dato’ Michael Ong and Dato’ Dr. Low Moi Ing are appointed as non-independent non-executive directors of MQREIT.

Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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