KPREIT reports 66% decline in first quarter net profit

Date: May 15, 2019

Kingston Properties Limited, for the three months period, reported rental income of $59.31 million, 6% more than the $55.96 million reported in the previous corresponding period. KPREIT stated that, “The increase in revenue occurred due to the addition to the portfolio of a four-story office building in New Kingston, Jamaica, however the increase was offset by the reduction in rental revenue in our US subsidiary following the sale of a total of eight (8) condo units in Florida over the last twelve months.”

Operating expenses fell by 13% to $31.37 million relative to the $35.87 million posted for the same period last year. Management noted that, “operating expenses for the first quarter reflect lower marketing and shared costs for the units at the W Fort Lauderdale that were managed by the hotel operator as well as reductions in HOA dues, property taxes and insurance following the sale of several condo units in Florida.”

As such, results of operating activities before other gains amounted to $27.94 million, a 39% increase when compared to the $20.09 million posted last year.

Miscellaneous gain amounted to $74,000 (2018: $86,000). Management fees closed at $1.55 million (2018: $526,000).

Operating profit closed the period at $22.40 million, this compares with the $10.13 million a booked a year ago. Net finance costs closed at $9.01 million relative to $2.21 million recorded for the 2018 three months period. This led to profit before taxation of $13.39 million compared to profit of $8.01 million for 2018. The Company stated that, “the year on year increase primarily results from lower year over year net unrealized gains on translation of foreign currency investments and borrowings and higher total interest costs due to increased borrowings compared to the prior year.”

Tax charges for the period amounted to $857,000 versus tax credit of $29.32 million in 2018, resulting in net profit of $12.53 million compared to profit of $37.33 million in the comparable period last year, a 66% decline.

Total comprehensive loss for the period closed at $6.60 million versus total comprehensive income of $38.13 in the same period last year. KPREIT mentioned that, “this was primarily due to significantly higher foreign exchange differences on translation of our foreign operations emanating from the depreciation of the Jamaican dollar against its US counterpart.”

Earnings per share amounted to $0.04 for the period relative to earnings per share of $0.12 in 2018. The twelve months trailing earnings per share is $0.03. The number of shares used in our calculations is 321,992,668. Notably, KPREIT stock price close the trading period on May 15, 2019 at $6.00.

The Company highlighted that, “since our portfolio shift away from investments in Southern Florida, there has been a steady rise in our net operating income year on year. Occupancy levels remain fairly high across our portfolio during the first quarter of 2019 averaging approximately 95% which is a modest improvement over the level of 93% recorded in the first quarter of 2018. This has resulted from strong rental markets both in Jamaica and the Cayman Islands as well as the re-negotiation of longer-term leases for our condo-tel units at the W Fort Lauderdale. While we will remain overweight in the Cayman Islands and Jamaica, our intention is to diversify throughout the Caribbean and Latin America region. Economic data out of the US continues to be favourable however and we accordingly expect to pursue opportunistic acquisitions in the US and make portfolio shifts to this market as required.”

Balance Sheet at a glance:-

As at March 31, 2018, total assets totalled $2.85 billion, 11% more than the $2.56 billion booked as at March 31, 2018. The growth was due to increases in ‘Cash and Cash Equivalents’ and ‘Furniture, software and equipment’ which closed at $143.67 million (2018: $27.14 million) and $6.35 million (2018: $3.70 million), respectively.

Shareholder equity closed at $1.77 billion, down from last year’s $1.78 billion, resulting in book value per share of $5.51 (2018: $5.52).


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