August 17, 2020
Kingston Properties Limited reported Rental Income of US$903,470, 5% more than the US$856,875 reported for 2019. However, for the quarter, there was a 12% rise from US$401,676 in 2019 to US$448,890. KPREIT noted that, “The higher year on year figure was mainly due to the acquisition of the Rosedale warehouse properties in the Cayman Islands and achieving full occupancy at the Grenada Crescent property.”
Operating expenses rose 10% to US$549,133 relative to the US$501,488 posted for the same period last year. Management stated that, “The increase is mainly due to higher broker fees and staff costs. The Group continues to record declines in direct property costs with the disposal of condos in the US.”
As such, Results of Operating activities before other gains amounted to US$354,337, a marginal decrease from the US$355,387 posted last year. While, for the quarter, results of operating activities before other gains closed at US$153,542 (2019: US$139,304).
Loss on disposal of investment property totalled US$3,320 for the period relative to the previous year’s loss of US$75,643.
Miscellaneous Income amounted to US$2,463 (2019: US$6,364). Impairment gain on financial assets amounted to US$5,802 relative to a loss of US$31,896 reported in the previous year. Management fees amounted to US$30,111, 2% below 2019’s US$30,701.
Operating profit closed the six months period at US$389,393, this compares with the US$284,913 booked a year ago. For the quarter, operating profit amounted to US$168,855 (2019: US$101,332).
Net finance costs closed at US$679,481 relative to net finance cost of US$157,499 for the six months ended June 2019. Of this, finance cost and finance income amounted to US$850,945 (2019: US$171,210) and US$171,464 (2019: US$13,711), respectively. It was noted that, “The figure in the first half of 2019 included a loss on disposal of investment properties in Florida totalling $75,634, as well as an impairment loss on financial assets of $31,896.” Also, KPREIT stated that, “the year on year increase in finance costs primarily resulted from realized and unrealized foreign exchange losses amounting to $639,705 for the half year and $260,123 for the quarter. These FX losses arose from the translation of local currency balances held at the end of the reporting period as the Group held higher than normal local cash balances raised from our rights issue in the fourth quarter of 2019. These sums are earmarked for future property acquisitions in Jamaica as well as the undertaking of capital improvement projects on certain of our local properties. The unrealized exchange losses were however partially offset by higher interest income from our investment of those funds.”
This resulted in a loss before taxation of US$290,088, compared to the profit before taxation of US$127,414 for 2019.
Tax charge for the six months amounted to US$53,209 (2019: US$13,525) due to “primarily reflecting higher deferred tax charges,” as per KPREIT. This resulted in a net loss of US$343,397 relative to a net profit of US$113,889 in the comparable period last year. Net loss for the quarter amounted to US$132,143 (2019 profit: US$53,909).
Moreover, total comprehensive loss for the six months was US$343,397 whereas total comprehensive income was US$113,889 for the similar period in 2019.
Loss per share for the six months ended June 30, 2020 amounted to US0.051 cent for the period relative to earnings per share of US0.017 cent in 2019. For the quarter, loss per share amounted to US0.019 cent for the period relative to earnings per share of US0.008 cent in 2019. The number of shares used in our calculations is 677,712,399. Notably, KPREIT stock price close the trading period on August 14, 2020 at J$7.60.
Management highlighted that, “The board and management continue to assess the impact on our operations of measures being used to curb the spread of the disease. This includes on-going evaluation, through stress testing of the negative impact on a macro-level for both employment and GDP numbers globally, which ultimately will affect our portfolio in terms of occupancy and rent collections. The sectors mainly affected by the measures are hospitality, manufacturing and the retail trade. This was evident during the second quarter, resulting in higher vacancy levels in the US and some level of rent abatement in the Cayman Islands and Jamaica. 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. With this prolonged period of economic distress the board approved a plan that required the Company to maintain sufficient cash resources to weather any decline in rental revenue or the assumption of un-programmed expenses and debt service obligations.”
Nevertheless, according to KPREIT, “The diverse nature of our tenant base continues to offer some level of resilience to our operating income. While vacancy levels have increased in the US, we maintain full occupancy in Jamaica and 98% in the Cayman Islands, both of which now account for 87% of our entire portfolio following our recent acquisition of a four-story office building in Georgetown, Cayman Islands. Whereas the Company will continue to prudently maintain higher than normal cash balances which will allow us to meet working capital requirements, we still continue to prospect for attractive deals that meet our required risk adjusted returns. The thrust to divest ourselves of more condos in the US continues, even in current market conditions. We recently disposed of the remaining unit at Midblock Condominiums in Midtown, Miami and the cash generated from that disposal was used towards debt reduction in the US. 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 June 30, 2020, assets totalled US$39.35 million, 77% more than the US$22.19 million booked as at June 30, 2019. The growth was mainly due to 1383% increase in ‘Cash and Cash equivalents’ which amounted to US$13.65 million versus US$920,482 at the end of the 2019.
Shareholders’ equity closed at US$29.96 million, up US$15.67 million from last year’s US$14.29 million, resulting in book value per share of US$0.04(2019: US$0.02).
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