Atrium Real Estate Investment Trust (KLSE: 5130) is an industrial REIT listed on Bursa Malaysia on 2 April 2007 which derives income from a portfolio of industrial properties mainly warehouses and office buildings annexed within in Malaysia. As I write, Atrium REIT is worth RM 214.9 million in market capitalisation as of 29 December 2019. Here, I would be covering on its latest developments, financial results and valuation ratios. Thus, here are 7 things to know about Atrium REIT before you invest: 

  • Financial Results
    Atrium REIT has reported the following:

YearGroup Revenue Reasons: 

2010

Increase by RM 1+ million 
Renewal of leases for Atrium Shah Alam 1 and Atrium Puchong Properties. 

2012

Increase by RM 2+ million
Rent Contributions from newly acquired Atrium USJ for RM 25 million in 2011. 







2015







Decrease by RM 3+ million
Non-Renewal of lease for Atrium Shah Alam 2 upon expiry.

Partial Void in Atrium Puchong.

Disposal of Atrium Rawang for RM 13.5 million in 2015, contributing to a stable distributable income in that year. 

2016

Increase by RM 1+ million
New leases secured for Atrium Shah Alam 2 and Atrium Puchong in 2016. 

2017

Increase by RM 2+ million
Full-12 month Contribution from leases for Atrium Shah Alam 2 and Atrium Puchong.




2018




Increase by RM 1+ million
Rent Contributions from newly acquired Atrium Shah Alam 3 for RM 21.7 million in 2018.

Positive Rent Reversion for Atrium Puchong



Thus, its group financial results for the past 10 years from 2009 to 2018 is as follows:


  • Proposed Acquisitions:
    Since end-2018, Atrium REIT is undertaking the following acquisition of new properties:

    Property 1: Bayan Lepas 1 (1 November 2018)
    It is a piece of leasehold land with a factory and all buildings annexed in Bayan Lepas for RM 50.0 million from Lumileds Malaysia, the vendor. It involves the REIT acquiring the property and leasing it back to Lumileds Malaysia for the long-term. This deal has yet to be concluded.

    Property 2: Bayan Lepas 2 (1 November 2018)
    It is a piece of leasehold land with a factory and all buildings annexed in Bayan Lepas for RM 130.0 million from Lumileds Malaysia. Similar to its above deal, the REIT will lease it back to Lumileds Malaysia after buying it. This acquisition was completed on 7 October 2019 for a total sum of RM 130.0 million. The lease to Lumileds Malaysia is for RM 10.7 million in its first year rent. There will be a 3% rental escalation for the next 15 years for this rental agreement.

    Property 3:  Shah Alam Factory (27 December 2019)
    It is a single-storey factory in Seksyen 16, Shah Alam for a total price of RM 45.0 million from Permodalan Nasional Bhd (PNB). Atrium REIT is in the opinion, according to its announcement document, that the factory has redevelopment potential for a two-storey ramp-up warehouse. The REIT expects the completion of this acquisition in calendar year 2020.

    Impact:
    Upon completion of these acquisitions, Atrium REIT will grow its assets under management (AUM) from RM 280+ million to more than RM 500 million in 2020.

  • Corporate Initiatives
    From 2009 to 2018, Atrium REIT maintained its number of units issued at 121.8 million. Subsequently, it had undertaken a couple of corporate exercises as follows:

    Initiative 1: Private Placement (5 April 2019)
    The REIT had completed the issuance of 11.0 million private placement shares on 5 April 2019. This had invited Hong Leong Assurance (HLA) to buy these units and become a strategic investor to Atrium REIT.

    Initiative 2: Rights Issue (30 September 2019)
    The REIT had completed the issuance of 58.5 million rights shares as of 30 September 2019. They are issued on the basis of 2 rights shares for every 5 existing ordinary shares at RM 1.02 per unit. They are issued to partially finance the acquisition of Property 2 at Bayan Lepas.

    Following this rights issue, HLA has subscribed to them and maintained its ownership of 7.51% unitholdings of Atrium REIT.

    Thus, the main unitholders of Atrium REIT and their latest unitholdings as of 29 December 2019 are as follows:

No.Major UnitholdersUnitholdings (%)
1Cham Kam Tuck20.72%
2Hong Leong Assurance Bhd7.51%
3Glory Blitz Industries Sdn Bhd6.91%
  • Balance Sheet Strength
    Based on the abridged prospectus given, Atrium REIT would have a net assets of RM 1.29 per unit. Its gearing ratio would increase from 20+% in Q2 2019 to 40+% after acquiring Property 2 at Bayan Lepas.



Source: Abridged Prospectus on 30 August 2019

  • Pro-Forma Distribution per Unit (DPU)
    Atrium REIT had calculated that it would earn RM 18.1 million a year in realised earnings after the inclusion of Property 2 at Bayan Lepas. Thus, it would record a gross DPU of 8.82 sen. For Malaysia-listed REITs, DPUs declared are subjected to a withholding tax of 10% if it is distributed to individual investors. Thus, its net DPU would be 7.056 sen per annum.

    The calculation is as follows:


  • P/B Ratio
    As of 29 December 2019, Atrium REIT is trading at RM 1.05 per unit. As such, its current P/B Ratio is 0.81, above its 5-year average of 0.79.


  • Net Distribution Yield
    Based on net DPU of 7.056 sen per year, Atrium REIT’s net distribution yield is 6.72% per annum, above its 5-year average of 6.11% a year. 

VIA’s Verdict 

So, is this a good time to invest in Atrium REIT at RM 1.05 a unit today? 

On the positive note, it had attracted HLA to be a high-profile strategic investor, completed one main property acquisition in 2019, and has two properties to be completed in 2020. They would significantly expand its real estate portfolio to a total beyond RM 500+ million upon completion. This is in addition to having an attractive projected yield of 6+% per annum. 

The things to take note is that Atrium REIT has a small portfolio of 6 properties and it would continue to depend on a small group of tenants for rental income. Thus, it possesses greater concentration risk of a few properties and tenants as compared to bigger REITs, which have a bigger and more diversified portfolio of both properties and client base for income derivation in the future. 

I’ll leave you to decide what and how you should invest in the stock market. 

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