YTL Hospitality REIT (YTLREIT) reported its FY24 core net profit, which missed expectations by 5% and 3% according to Maybank Investment Bank (Maybank). The discrepancy was attributed to higher-than-expected finance costs, despite FY24 distributable income increasing 11% year-on-year (YoY) to RM140.9 million. The final gross dividend per unit (DPU) of 4.09 sen brought FY24 DPU to 8.26 sen.

Maybank maintained its HOLD rating on YTLREIT with a revised lower dividend discount model target price (DDM-TP) of RM1.25, down by 3 sen, factoring in a 7.7% cost of equity (Ke).

The bank noted the core net profit for 4QFY24 was RM28.4 million, a 1.3% increase YoY but a 35.2% decline quarter-on-quarter (QoQ). FY24 core earnings rose 6.6% YoY to RM148.8 million, driven by contributions from Hotel Stripes Kuala Lumpur, renewed rental income from JW Marriott Hotel, and the improved performance of Australian hotels.

The Bank observed that the 4QFY24 earnings were offset by a 20% rise in finance costs due to higher interest rates on AUD borrowings and increased borrowing to finance the acquisition of Hotel Stripes Kuala Lumpur. Near-term earnings forecasts remained stable, with rental income from Malaysian and Japanese properties under master lease arrangements expected to sustain.

Gearing was projected to increase to 0.45x post-acquisition, along with the proposed renovation of the Syuen Hotel in Ipoh and the development of Moxy Niseko.

The analyst at the bank adjusted its FY25/26 earnings forecasts by -1% and -2%, respectively, following the FY24 full-year results. The growth estimates were still driven by improved performance in Australian properties, with higher room rates and occupancy rates anticipated.

Maybank also introduced its FY27 earnings forecast, maintaining a cautious but steady outlook for YTLREIT.