Risks flagged in Al-Aqar Healthcare Reit's overseas push

KUALA LUMPUR: CIMB Securities Sdn Bhd remains cautious about Al-Aqar Healthcare Real Estate Investment Trust's (Al-Aqar Reit) plans to expand beyond Malaysia, citing its lack of a proven track record and familiarity with the overseas markets.
The concern is supported by the Reit's pending divestment of its only international asset, the Jeta Gardens Aged Care Facility in Australia.
Acquired in 2010 for RM132 million, the asset is now being disposed of for RM74.9 million, reflecting a significant 43 per cent discount to the original purchase price.
With gearing currently at 41 per cent and expected to rise to 48 per cent following two major acquisitions, CIMB Securities also noted that Al-'Aqar is exploring asset disposals of up to RM65 million to maintain headroom below the 50 per cent regulatory gearing limit.
The Reit is in the midst of acquiring two properties — the new buildings of KPJ Ampang Puteri Specialist Hospital at RM131 million and KPJ Penang Specialist Hospital at RM110 million — with a combined value of RM241 million.
"Post acquisition, gearing could increase to around 48 per cent, approaching the regulatory limit of 50 per cent. We note that Al -Aqar is exploring potential asset disposals as part of its capital management efforts.
"Based on our estimates, disposals could amount to about RM65 million, which would provide debt headroom of about RM72 million before breaching the regulatory threshold," the firm said.
CIMB Securities is also neutral on Al-Aqar Reit's refreshed VENTURE27 strategy that targets a portfolio growth to RM2.3 billion by 2027 through the acquisition of third-party assets and a reduced dependency on hospital assets.
"The strategy aims to reduce reliance on a single tenant, KPJ Healthcare Bhd, by expanding into developed regional markets and diversifying across the healthcare supply chain beyond hospital assets," the firm said.
Six of its leases are up for renewal in the second half of this year, with five proposals have been submitted for unitholder approval at an upcoming extraordinary general meeting, while discussions for the remaining lease involving KPJ Tawakkal KL Specialist Hospital are ongoing.
CIMB Securities kept its "Hold" call on the Reit with a target price of RM1.33 per share, supported by distribution yields of 5.8–6.1 per cent for financial year 2025 (FY25) to FY27.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Malaysian Reserve

2 hours ago

• Malaysian Reserve

Bank credit costs seen rising on SME strain

CREDIT costs in the Malaysian banking sector are expected to edge higher as economic growth slows and risks mount within the small and medium enterprise (SME) segment. CIMB Securities Sdn Bhd, in its latest report on historical asset quality trends, is maintaining a 'Neutral' stance on the sector despite forecasting mild deterioration in credit metrics. 'We have reviewed our sector credit cost projections, taking into consideration the potential impact of slower growth on the SME segment and historical trends. Our assumptions indicate that sector credit costs may rise by 12 basis points (bps) on account of a possible change in probability of default assumption for the SME segment. 'However, as this is in line with our earlier assumed 15bps increase in credit costs, we are maintaining our forecasts and 'Neutral' rating,' it noted. The research house said that the SME portfolio remains under scrutiny. 'The initial segment that may face some risk is likely to be the SME segment, which currently accounts for 16.5% of total loans on average for the banks under our coverage,' it stated. 'Assuming probability of default (PD) is raised to 6% from 4.5% for the SME segment, while loss given default is maintained at 50%, this implies that the estimated credit loss (ECL) may need to be raised by 75bps for the SME segment in a slowing growth cycle. On overall basis, this translates to a 12bps increase in sector credit costs,' it explained. CIMB Securities noted that credit costs historically trend in tandem with macroeconomic cycles. 'During a normal economic cycle, credit costs usually range from 20bps to 30bps, while a good economic cycle typically leads to benign credit costs of 10bps-20bps. In a slower growth cycle, credit costs tend to climb higher than 30bps, towards the 40bps-50bps range.' The 2020 pandemic-driven recession provides a stark example. 'The most recent recession during the 2020 Covid-19 pandemic caused a significant jump in credit costs to 79bps in 2020, coinciding with a 5.5% year-on-year (YoY) decline in GDP and an 8.6% YoY drop in exports. Prior to that, during the 2008 recession, credit costs peaked at 70bps as GDP declined by 1.5% YoY and exports contracted by 10.9% YoY.' While direct trade-related loans remain low, secondary risks are a concern. 'Exports-related loans are insignificant, accounting for 1%-4.7% of total loans for banks under our coverage. We reiterate there will likely be a larger impact from secondary spillover effects on trade-related supply chain vendors and suppliers.' CIMB Securities is leaving its forecasts unchanged for now. 'We are maintaining our forecasts for now, as our latest estimate is based on broad assumptions while each bank's portfolio will have a different risk profile.' The firm retains its 'Buy' recommendations on Alliance Bank Malaysia Bhd, Public Bank Bhd and RHB Bank Bhd. 'We maintain our 'Neutral' sector rating, and retain our 'Buy' calls on Alliance Bank, Public Bank and RHB Bank, as dividend yields remain attractive at current levels,' it concluded. — TMR This article first appeared in The Malaysian Reserve weekly print edition

New Straits Times

3 hours ago

• New Straits Times

Strait of Hormuz risks could push oil above US$100 per barrel, Asia most exposed

KUALA LUMPUR: The potential closure of the Strait of Hormuz could sharply escalate geopolitical tensions in the Middle East and severely disrupt global oil supply chains, with Asia facing the greatest exposure, according to CIMB Securities. The research firm underscored the strategic significance of the strait, which handles nearly 20 per cent of global oil flows. With global oil supply projected to increase by 1.5 per cent to 104.35 million barrels per day in 2025, based on US Energy Information Administration (EIA) forecasts, any disruption could lead to widespread consequences for global energy markets. "Asia is particularly exposed, with China, India, Japan, and South Korea being the top destinations for crude oil moving through the Strait of Hormuz to Asia, collectively accounting for 69 per cent of crude oil and condensate volumes transported through the strait in 2024. "Any disruption to these flows could drive a renewed surge in oil prices, with inflationary spillovers extending across global economies," it said in a note. It said crude oil prices are expected to rise amid recent geopolitical tensions, with heightened volatility likely to continue in the short term. CIMB expects Brent crude to trade around US$85 per barrel in the near term, with volatility likely to persist amid elevated geopolitical risks. "Our analysis indicates that a supply disruption of 500,000 barrels per day (bbl/day) could result in a price increase of approximately US$10 per barrel, based on historical events. "The international sanctions imposed on Iran in 2011 to 2012 led to a supply loss of 1.4 million bbl/day, resulting in a US$30 per barrel increase in crude prices during that period. That said, the current global oil market is better cushioned by available spare capacity," it added. CIMB noted that OPEC+ currently has an estimated excess capacity of 5.7 million bbl/day, with Saudi Arabia and the United Arab Emirates contributing around 4.2 million bbl/day of that total. However, it highlighted a key risk: most of this supply is transported through the Strait of Hormuz, making it particularly vulnerable. "In our view, should the proposed closure of the Strait of Hormuz materialise, the risk premium could surge, potentially pushing Brent prices above US$100 per barrel," it added. The research house highlighted Dialog Bhd as a potential beneficiary of rising oil prices, mainly due to its upstream portfolio. The company currently operates three producing assets, including full ownership of the Bayan oilfield service contract, a 20 per cent stake in the D35/D21/J4 production sharing contract, and a 50 per cent interest in the L53/48 concession in Thailand. "These assets contributed approximately 35 per cent to Dialog's financial year 2024 core net profit. We estimate that every US$10 per barrel rise in the average Brent oil price assumption will boost Dialog's financial year 2026 core net profit by 2 per cent," it said. CIMB's current forecast assumes an average Brent oil price of US$71 per barrel for 2025.

Malay Mail

3 hours ago

• Malay Mail

TNB shares fall to RM14.16 after tariff update; analysts maintain ‘Buy' amid grid upgrade push

KUALA LUMPUR, June 23 — Tenaga Nasional Bhd shares trended lower in early trade today after the Regulatory Period 4 (RP4) tariff schedule revision announcement under the incentive-based regulation (IBR) framework effective July 1, 2025. At 10.10 am, TNB's share fell six sen to RM14.16 per share with 177,300 shares traded. The trading of the national utilities company's shares was halted for one hour at opening today and resumed at 10 am, said the company in a Bursa Malaysia filing today. The Energy Commission had previously announced a new average base electricity tariff of 45.4 sen/kWh, effective July 1, 2025 to Dec 31, 2027 under the RP4. TNB had said implementing the revised electricity tariff in Peninsular Malaysia is positive for the company vis-a-vis the National Energy Transition Roadmap; that the company is committed to ensuring a reliable and continuous electricity supply throughout Peninsular Malaysia. Meanwhile, Hong Leong Investment Bank Bhd (HLIB) in a note said TNB would benefit from the higher regulated asset base starting from 2025 under the new RP4-5 (2025-2030), given the urgent requirement to upgrade the grid for energy transition and to support data centre growth and renewable energy developments. It has a 'Buy' call with an unchanged target price of RM16.20. Meanwhile, CIMB Securities said the impact is likely to be neutral for TNB. 'Regardless of tariff changes, the incentive-based regulation framework provides regulatory adjustments such that TNB ultimately earns the regulatory rate of return on the regulated asset base,' it said. The investment bank maintains its 'Buy' call for TNB with key downside risks including higher-than-expected operating costs, unscheduled power station outages, and lower-than-expected spending on RP4 contingent capital expenditure. 'Under RP4, the RAB is expected to grow healthily, led by a 12 per cent higher base capex of RM26.6 billion and contingent capex of RM16.3 billion,' it added. — Bernama