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.
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