KPREIT reports 55% decline in nine months net profit

November 5, 2020

Kingston Properties Limited reported Rental Income of US$1.47 million, 16% more than the US$1.26 million reported for 2019. However, for the quarter, there was a 40% rise from US$406,013 in 2019 to US$567,352. Management noted, “The higher year on year figure was mainly due to the acquisition of the Harbour Centre Office Building in the Cayman Islands, and a return to full occupancy at the Grenada Crescent property and the W Fort Lauderdale condo-tel units.”

Operating expenses rose 10% to US$804,298 relative to the US$732,003 posted for the same period last year. The Company explained that this is due to an increase in broker fees and staff costs.

As such, Results of Operating activities before other gains amounted to US$666,523, a 26% increase from the US$530,886 posted last year. While, for the quarter, results of operating activities before other gains closed at US$321,187 (2019: US$172,024). KPREIT mentioned, “these results demonstrate the Group’s efforts in continuing to boost efficiency in operations, with NOI margin at 54.7%, which is above the global average for REITs of approximately 48%.”

Gain on disposal of investment property totalled US$14,405 for the period relative to the previous year’s loss of US$92,388.

Miscellaneous Income amounted to US$2,435 (2019: US$8,472). Impairment gain on financial assets amounted to US$5,802 relative to a loss of US$52,978 reported in the previous year. Management fees amounted to US$46,813, 1% below 2019’s US$47,490.

Operating profit closed the nine months period at US$735,978, this compares with the US$441,482 booked a year ago. For the quarter, operating profit amounted to US$346,584 (2019: US$180,988).

Net finance costs closed at US$676,597 relative to net finance cost of US$262,592 for the nine months ended September 2019. Of this, finance cost and finance income amounted to US$866,237 (2019: US$282,785) and US$189,640 (2019: US$20,193), respectively. KPREIT stated, “The year on year increase in finance costs primarily results from realized and unrealized foreign exchange losses arising from the translation of local currency balances held at the end of the reporting period as the Group held higher than normal Jamaican dollar cash balances. These sums were earmarked for a property acquisition in Jamaica as well as the undertaking of capital improvement projects on certain of our properties. The unrealized exchange losses were however partially offset by higher interest income from our investment of cash on hand.”

This resulted in a profit before taxation of US$59,381, compared to the profit before taxation of US$178,890 for 2019. While, for the quarter, profit before taxation closed at US$349,467 (2019: US$51,071).

Tax credit for the nine months amounted to US$10,773 relative to a charge of US$23,633 booked in 2019. This resulted in a net profit of US$70,154 relative to a net profit of US$155,257 in the comparable period last year. Net profit for the quarter amounted to US$413,553 (2019: US$41,367).

Moreover, total comprehensive income for the nine months was US$70,154 while total comprehensive income was US$155,257 for the similar period in 2019.

Earnings per share for the six months ended September 30, 2020 amounted to US0.01 cents for the period relative to earnings per share of US0.023 cents in 2019. For the quarter, earnings per share amounted to US0.06 cents (2019: US 0.01 cents). The trailing twelve months EPS was US 0.28 cents. The number of shares used in our calculations is 677,712,399. Notably, KPREIT stock price closes the trading period on November 4, 2020 at J$6.98.

In response to Covid19 impact the company stated, “We continue to maintain a safety-first approach to dealing with the pandemic while constantly assessing the impact that the measures to curb the spread of the disease could have on our operations. While most of our office tenants continue to exercise a hybrid of Work From Home (WFH) and staggered in office schedules, our warehouse tenants continue to operate at near full capacity while adhering to the measures stipulated by the respective governments. CBRE Econometric Advisors and Oxford Economics’ best guesses are that we will see a return to pre-COVID employment levels by the end of 2021, while the consensus is that real estate prices in major economies are likely to continue to stagnate until 2023.”

Furthermore, “The diverse nature of our tenant base continues to offer some level of resilience to our operating income with full occupancy in Jamaica and 96% in the Cayman Islands – both now accounting for 88% of our entire portfolio. Despite the return to 100% occupancy at the W Fort Lauderdale condo-tel units, our thrust to divest ourselves of more condos in the US continues, even in current market conditions. Analysts predict a decline in US home prices in the coming year once the forbearance periods for most borrowers and tenants expire and the inability of the US Congress to agree to a new stimulus package. The Group will continue to prudently maintain high cash balances which will allow us to meet working capital requirements and continue to prospect for attractive deals that meet our required risk adjusted returns. Interest rates are expected to remain fairly low for an extended period and we will continue to use leverage prudently to increase our investment property asset base.”

Balance Sheet at a glance:-

As September 30, 2020, assets totalled US$44.87 million, 104% more than the US$22.01 million booked as at September 30, 2019. The growth was mainly due to 90% increase in ‘Investment Properties’ which amounted to US$38.98 million versus US$20.47 million at the end of the 2019.

Shareholders’ equity closed at US$29.97 million, up US$15.85 million from last year’s US$14.13 million, resulting in book value per share of US$0.04 (2019: US$0.02).


Analyst Certification The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.

Company Disclosure The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.