KPREIT reports 55% decline in six months net profit

Date: August 16, 2019

Kingston Properties Limited (KPREIT), for the six months ended June 30, 2019, reported rental income of $112.94 million, 6% more than the $106.51 million reported for 2018. However, for the quarter, there was a 6% rise from $50.55 million in 2018 to $53.55 million. Property management fees for the six months period amounted to $4.04 million (2018: $1.93 million). KPREIT stated, “This was primarily due to the addition of the Grenada Crescent asset in the final quarter of 2018.”

Operating expenses decreased by 4% to $66.09 million (2018: $68.52 million). The Company recorded a Fair value gain on investment properties of $23.76 million versus fair value loss on investment properties of $10.57 million booked in the same period last year. Management noted that, “Operating expenses for H1 2019 reflect lower HOA fees and property taxes, two of our largest expense items.”

Miscellaneous gain went up 466% to $838,000 in 2018 (2018: $149,000), while, Miscellaneous gain for the second quarter amounted to $764,000, up grossly from $63,000 reported for the comparable quarter of 2018.

As such, Results of operating activities before other gains amounted to $61.36 million, a 155% increase (2018: $24.11 million) compared to the corresponding period in 2018. While, for the quarter, results of operating activities before other gains closed at $38.93 million (2018: $13.98 million). The Company mentioned, “This was primarily due to a net fair value gain on investment property of $23.8 million, after recording a loss on disposal of investment properties following the sale of two condo units in Florida, as well as, an impairment loss of $4.2 million due to the Group’s adoption of IFRS 9.”

Finance cost was $33.07 million for the six months ended June 30, 2019 compared with $22.75 million for the same period of 2018, a 45% growth. Finance income for the period totalled $2.16 million versus $31.24 million for the corresponding period for 2018. Consequently, the company recorded a net finance income of $30.91 million relative to net finance cost of $8.49 million booked in the previous corresponding period.

This led to a profit before taxation of $30.44 million, a 7% decrease relative to the $32.59 million the year prior.

Taxes of $1.84 million were booked compared to a tax credit of $30.87 million last year. Net Profit for the period was $28.61 million compared to $63.47 million for the similar period last year. Net profit for the quarter fell to $9.42 million (2018: $26.13 million). The Company highlighted, “This was primarily due to a combination of nearly $31 million of unrealized foreign exchange gains plus another $31 million of tax credits in 2018; compared to $6 million in unrealized foreign exchange losses and a $1.8 million tax charge in H1 2019.”

Earnings per share amounted to $0.089 for the period (2018: $0.197).  The EPS for the second quarter was $0.029 (2018: $0.081). The twelve-month trailing EPS amounted to $0.15. The number of shares used in our calculations is 321,878,599. As of August 15, 2019, the stock was trading at $7.54.

Balance Sheet at a glance:

As June 30, 2019, assets totalled $2.88 billion, $203.43 million more than the $2.67 billion booked as at June 30, 2018.  The increase in assets was as a result of an increase in ‘cash and cash equivalents’ which closed at $131.29 million relative to $109.10 million a year earlier. ‘Investment Properties’ also contributed to the increase closing at $2.67 billion (2018: $2.49 billion).

Shareholders’ equity closed at $1.81 billion, up 1% from $1.79 billion, resulting in book value per share of $5.62 (2018: $5.56).

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