AL-AQAR HEALTHCARE REAL ESTATE INVESTMENT TRUST

Business Summary

Al-Aqar Healthcare REIT (ALAQAR REIT)  is a real estate investment trust that involved in the business of hospital rental. It is the only REIT listed in Malaysia that collects rental from its portfolio of buildings, which are mainly hospitals and healthcare centres! It is also the world’s first Islamic REIT. It is the sister company of KPJ Healthcare Bhd, a healthcare service provider company also listed in the Kuala Lumpur Stock Exchange. ALAQAR REIT basically helps KPJ Healthcare Berhad to manage its hospital!

Dividends (4/5):  ⭐ ⭐ ⭐ ⭐ 

Value (2/5):  ⭐ ⭐ 

Financials (4/5): ⭐ ⭐ ⭐ ⭐ 

Growth (4/5):  ⭐ ⭐ ⭐ ⭐ 

Business (3/5): ⭐ ⭐ ⭐ 

Reference: (i) MyKayaPlus Metrics Definition (ii) MyKayaPlus Metric Evaluation Scale

Portfolio

As of 2018, ALAQAR REIT currently has 22 properties, 19 comprising of hospitals and 3 healthcare-related properties. Its properties are majorly in Malaysia, with one nursing home property in Australia.

KPJ Penang Specialist Hospital


Financial Performance

ALAQAR REIT has been steadily growing its portfolio of investment properties for the last 10 years. In its peak, it has 25 units of investment properties, which was the same period of time it recorded its highest-ever annual operating revenue. 

Revenue dipped marginally after ALAQAR REIT divested 3 units of investment property since the year 2015 (2 properties in Indonesia and 1 property in Malaysia). In Aug 2019, ALAQAR REIT has just announced they will be planning to acquire KPJ Batu Pahat Specialist Hospital in Johor for a cash consideration of RM 78 million. This would bring its YTD number of properties to 23, with additional rental income expected to increase it’s up and coming quarterly report. 

Distributable Income

Net income distribution for ALAQAR REIT has been flattish for the past 5 years. Distribution Per Unit fluctuates from around RM 0.04 per unit to RM 0.09 per unit. Since ALAQAR REIT is the sister company of KPJ Healthcare Berhad, the number of hospitals ALAQAR REIT stands to hold under its portfolio of properties will be directly co-related to KPJ Healthcare Berhad’s future growth plans.

Net Asset Value

Asset value-wise, ALAQAR REIT has been showing a YoY steady increase in its net assets, even though with the previous disposal of 3 assets along the years, ALAQAR REIT manage to grow its asset value to offset the divestment of investment properties. 

Balance Sheet 

YearAssets (RM’000)Liabilities (RM’000)Unit Holder’s Fund (RM’000)Current RatioGearing Ratio (%)
20181,580,468632,670947,7984.7138.20%
20171,556,424633,135923,2900.1636.85%
20161,611,214715,144896,0683.7340.58%
20151,594,382714,556879,8261.4641.00%
20141,592,422760,879831,5420.8546.04%

As of 2018, ALAQAR REIT has Assets of up to RM1.58 billion. Liabilities made up of RM 632 million while Unit Holder’s fund stands at RM 948 million. ALAQAR REIT’s 2018 current ratio is 4.71. Gearing ratio stood at 38.20%, which is within the maximum 50% tolerance. 

Operating Cash Flow & Income Distribution

Net Cash Flow from running its hospital rental business was on a steady rise until the year 2018, where approximately RM 39 million of additional cash was charged out under “Other payables and accrued expenses”. A quick check on the sudden dip in operating cash flow was due to the fact it was an amount due to related party transaction, which consists of the purchase of investment properties in prior years, recognized under accrual accounting standards but only captured under cash flow statement upon cash settlement. Stripping off this one-off payable, ALAQAR REIT shows stable operational cash flow derived from its rental income.

Future Growth

According to The Edge Markets, by 2030, about 14% of the population would be aged 60 and above. By 2030, there will be more senior citizens, creating concerns with health with long queues at public hospitals, and the government has to bear higher medical costs. All these factors provide private healthcare providers with opportunities to tap into senior citizen demographics.

ALAQAR REIT stands to benefit on the growth trajectory of KPJ Healthcare Berhad. The more hospitals KPJ Healthcare Berhad build and brand, the more potential these hospitals will be injected into ALAQAR REIT lists of investment property portfolio. 

Moreover, with the view of insurance companies in the ASEAN region also reporting increased revenue generally, private healthcare claims could potentially be subsidized by premium holders when their medical needs arise.    

Price

MyKayaPlus Verdict

ALAQAR REIT is one of the few M-REIT that is active in acquiring new properties. Moreover, it is the only healthcare REIT that is listed in Malaysia. The other health care REIT would be IHH Bhd’s hospital REIT but listed in the Singapore Exchange under Parkway Life REIT. 

With its concentration of hospital predominantly in Malaysia, ALAQAR REIT stands to grow along with sister company KPJ Healthcare Berhad. But private healthcare is also a highly competitive business as there are a few players in the Malaysia private healthcare segment.

Would you like to own hospitals instead of shopping malls and office buildings? Let us know in the comments below! 

DISCLAIMER
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
No warranty is made with respect to the accuracy, adequacy, reliability, suitability, applicability, or completeness of the information contained. The author disclaims any reward or responsibility for any gains or losses arising from direct and indirect use & application of any contents of the article/report/written material

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