Corporate Presentation 4 th Quarter 2018 Financial Results 17 January 2019
Important Notice This presentation is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for units in MRCB-Quill REIT (formerly know as Quill Capita Trust) ( MQReit ). The past performance of MQReit is not necessarily indicative of the future performance of MQReit. This presentation may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitations) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from similar developments, shifts in expected levels of property rental income and occupancy, changes in operating expenses including employee wages, benefits and training, property expenses and governmental and public policy changes. You are cautioned not to place undue reliance on these forward-looking statements which are based on the manager s current view of future events. The value of units in MQReit (Units ) and the income derived from them may fall as well as rise. Units are not obligations of, deposits in, or guaranteed by, the manager or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount invested. Investors have no right to request the manager to redeem their Units while the Units are listed. It is intended that unitholders may only deal in their Units through trading on the Main Board of Bursa Malaysia Securities Berhad. Listing of the Units on the Bursa Securities does not guarantee a liquid market for the Units. The information in this Announcement must not be published outside Malaysia. 2
Contents Financial Results Portfolio Update KLCA & Cyberjaya Office Market Outlook Penang Retail Market Outlook Conclusion Slide No. 4 10 22 3
Financial Results Quill Building 5 - IBM
MQREIT records 4Q 2018 Realised Net Income of RM19.57 million (RM 000) Realised Revenue (Unaudited) 4Q 2017 44,662 (Unaudited) 4Q 2018 42,663 Variance 4.5% Net Property Income 36,026 31,818-11.7% Net Income 1 21,418 19,570-8.6% EPU 2 2.01 sen 1.83 sen -9.0% Distributable Income 4 2.01 sen 1.70 sen -15.4% Per Unit 3 1 Net Income refers to realised income after taxation (exclude gain from re-measurement of derivatives and revaluation surplus) 2 EPU refers to Realised Earnings Per Unit 3 4Q 2018 distributable income of RM18.18 million or 1.70 sen distributable income per unit consist of realised net income of RM19.57 million adjusted for reversal of Manager s management fees payable in units of RM1.39 million 5
8.08 sen DPU Declared for FY2018 (RM 000) (Unaudited) FY 2017 (Unaudited) FY 2018 Variance Realised Revenue 180,114 173,376-3.7% Net Property Income 141,341 132,801-6.0% Realised Income 88,006 84,654-3.8% EPU 1 8.24 sen 7.91 sen -4.0% Distributable Income 2 91,981 87,054-5.4% Distributable Income Per Unit 8.61 sen 8.13 sen -5.6% DPU 3 8.39 sen 8.08 sen -3.7% 1 EPU refers to Realised Earnings Per Unit (after manager s fees) 2 Distributable income for FY 2018 of RM87.05 million consist of realised net income of RM84.65 million adjusted for amounts previously not distributed amounting to RM2.4 million 3 DPU refers to Distribution Per Unit. FY 2018 DPU of 8.08 sen is 99.48 % of FY 2018 distributable income of RM87.05 million 6
Total Assets RM2.27 billion NAV per unit RM1.2419 (Unaudited) (Unaudited) (Unaudited) (Unaudited) as at as at as at as at 31 Mar 2018 (RM 000) 30 Jun 2018 (RM 000) 30 Sept 2018 (RM 000) 31 Dec 2018 (RM 000) Non Current Assets 2,181,654 2,183,285 2,183,971 2,179,272 Non Current Asset held for sale 25,000 - - - Current Assets 63,229 107,752 83,759 92,113 Total Assets 2,269,883 2,291,037 2,267,730 2,271,385 Current Liabilities 152,979 148,458 31,538 31,969 Non Current Liabilities 755,242 753,515 871,933 867,126 Net Assets 1,361,662 1,389,064 1,364,259 1,372,290 No of Units 1,068,000 1,071,783 1,071,783 1,071,783 NAV per Unit (RM) 1.2750 1.2537 1.2537 1.2419 7
Prudent Capital Management Next refinancing due in March 2020 Stable financial indicators Majority Fixed Rate Borrowings Fixed rate, CPs 76% RM118m RM118m CPs Floating rate, 24% Total Debt: RM853.70 mil (3Q 2018: RM854.40 mil ) Interest Coverage 3.09x (3Q 2018: 3.30x) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Gearing Ratio Gearing Ratio 37.7% 31-Dec SC Limit Below SC limit of 50% Maintain (3Q 2018 : 37.7%) Average Cost of Debt 4.5% pa Maintain (3Q 2018: 4.5% pa) Average Debt to Maturity 2.47 years Decrease (3Q 2018: 2.73 years) 8
Debt Maturity Profile Next Refinancing Due in March 2020 RM(mil) 450 400 350 300 250 200 150 100 50 RM118m CPs TL RM117m CPs RM118m Average debt to maturity : 2.47 years CP RM130mil MTN RM60 mil 45% CP RM279mil TL RM110mil 19% CP RM144mil TL MTN RM117m RM20mil CP RM279mil TL RM110mil 22% MTN RM130mil CP RM61 mil 14% TL RM117m 0 2018 2019 2020 2021 2022 2023 9 Note; 1. MTN - Medium Term Notes 2. CP Commercial Papers 3. TL Term Loan
Portfolio Update @ 31 December 2018 Quill Building 3 - BMW
Portfolio of Quality Assets @ 31 December 2018 Quill Building 1 - DHL 1 (c) Quill Building 4 - DHL 2 (c) Platinum Sentral - KL Sentral (a) Market Value of 10 Properties: RM2.18 bil (d) Total NLA: 2.19 mil sq ft *Excluding car park area Quill Building 3 Quill Building 5 - BMW (b) - IBM (b) Quill Building 2 - HSBC (b) Portfolio Occupancy Rate: 93.0% 11 Part of Plaza Mon t Kiara (a) Wisma Technip (a) TESCO Building Penang (b) Menara Shell (b) Weighted Average Term to Expiry: 5.04 years a) The Properties were valued by Nawawi Tie Leung Property Consultants Sdn. Bhd, an independent firm of professional valuer registered with the Board of Valuers, Appraisers & Estate Agents Malaysia. b) The Properties were valued by CH Williams Talhar & Wong Sdn. Bhd, an independent firm of professional valuer, registered with the Board of Valuers, Appraisers & Estate Agents Malaysia. c) The Properties were valued by Knight Frank Malaysia Sdn. Bhd, an independent firm of professional valuer, registered with the Board of Valuers, Appraisers & Estate Agents Malaysia d) All properties were based on valuation as at 31 December 2018.
Geographical Diversification By Valuation Penang 6% Mont' Kiara 6% Cyberjaya 17% ¹ Kuala Lumpur City Centre 8% Klang Valley 77% Cyberjaya 17% Penang 6% KL Sentral 63% Notes: (1) Other Klang Valley Area refers to Klang Valley generally excluding KL city centre, KL Sentral and Mont Kiara. Klang Valley refers to Kuala Lumpur and Selangor State excluding Kuala Selangor, Sepang and Sabak Bernam. (2) The Properties were valued by Nawawi Tie Leung Property Consultants Sdn Bhd and CH Williams Talhar & Wong Sdn Bhd, independent firm of professional valuers registered with the Board of Valuers, Appraisers & Estate Agents Malaysia. 12
Diversified Segmental Contributions Retail Assets 10% Car Park 2% By Valuation Notes: (1) Office comprises Quill Buildings, Platinum Sentral, Wisma Technip and Menara Shell (2) Retail refers to retail portion of Plaza Mont Kiara & TESCO Building Penang (3) Car Park refers to car parking bays in Plaza Mont Kiara Office 88% (4) The Properties were valued by Nawawi Tie Leung Property Consultants Sdn Bhd and CH Williams Talhar & Wong Sdn Bhd, independent firm of professional valuers registered with the Board of Valuers, Appraisers & Estate Agents Malaysia. 13
Tenant Mix Well Balanced Tenancy Mix FMCG, 0.3% Insurance 6.1% Manufacturing, 0.2% By Net Lettable Area Services 0.7% IT/ Electronics 5.0% Government Linked Office 15.5% Oil & Gas, 29.2% Retail 20.4% Education 0.9% Logistics 9.7% Automotive 2.7% Banking 9.3% 14
Lease Expiry Profile - 28% of Total NLA due in 2018, 75% Renewal Rate sq ft 900,000 Lease Up for Renewal by NLA - 31 Dec 2018 800,000 700,000 600,000 Lease Expiring Renewed Not Renewed Disposed 500,000 400,000 21% 39% 300,000 3% 200,000 100,000 7% 12% 17% 15-1% 2018 2019 2020 2021 2022-2032 % of net lettable area that are due for renewal
Lease Expiry Profile - 19% of Total NLA due in 2019 sq ft 900,000 Lease Up for Renewal by NLA - Jan 2019 800,000 700,000 600,000 Lease Expiring Renewed Not Renewed 500,000 400,000 44% 300,000 200,000 19% 18% 19% 100,000 16-0% 2019 2020 2021 2022 2023-2032 % of net lettable area that are due for renewal
KLCA & Cyberjaya Office Market Outlook Klang Valley & Penang Retail Market Outlook Wisma Technip
KL & Cyberjaya Office Market Outlook Klang Valley Purposed-Built Office Market (extracted from the Property Market Report 2018 prepared by Nawawi Tie Leung Property Consultants Sdn Bhd in December 2018) By the end of 2018, Klang Valley is estimated to have an existing stock of 147 million sq. ft. Of these, Kuala Lumpur accounted for 56%, followed by Selangor (27%, majority in Petaling District) and Putrajaya (16%, mostly government offices The volume of development activities in Klang Valley remains high with 23 million sq. ft. under construction, bringing total supply to 170 million sq. ft. by 2021 18 Overall, average occupancy rate has been heading downwards, from 84% in 2013 to 80% in 2018. This was due to the slower growth of occupiers demand compared to the escalating supply of office space due to the exuberance of developers in launching new commercial developments. During the five-year period between 2013 and 2018, office supply in Klang Valley recorded a compounded annual growth rate (CAGR) of 3.5%, whereas occupiers demand growth averaged at 2.3% per annum.
KL & Cyberjaya Office Market Outlook Klang Valley Purposed-Built Office Market (cont d) (extracted from the Property Market Report 2018 prepared by Nawawi Tie Leung Property Consultants Sdn Bhd in December 2018) Rental rate continued to remain stable despite downward pressure. Looking ahead, rental rates are expected to trend downward, as owners put in more effort to stay competitive in the market by providing attractive tenant incentives for major space users Capital value remains stable with no selling pressure 19
Klang Valley & Penang Retail Market Outlook Klang Valley Purposed-Built Retail ( PBR ) Market (extracted from the Property Market Report 2018 prepared by Nawawi Tie Leung Property Consultants Sdn Bhd in December 2018) Klang Valley will boost an existing stock of 67 million sq. ft. by end of 2018. In the State of Penang, completions of City Mall and Southbay Plaza will bring total supply to 19 million sq. ft. by year end By 2021, total supply in Klang Valley is projected to reach 82 million sq. ft., given the current pipeline of nearly 16 million sq. ft. In Penang, new developments are largely concentrated in Seberang Perai due to easier availability of larger land plots. Overall, 3 million sq. ft. of retail space across six centres are slated for opening during the next three years, and this will increase the total supply to 22 million sq. ft. by 2021 20
Klang Valley & Penang Retail Market Outlook Klang Valley Purposed-Built Retail ( PBR ) Market (extracted from the Property Market Report 2018 prepared by Nawawi Tie Leung Property Consultants Sdn Bhd in December 2018) As consumers benefit from more shopping mall options, new malls will likely to struggle in achieving their desired foot traffic, given the diluted market share amid overlapping catchment. In addition, retailers are cautious on expanding their business, given the subdued consumer sentiments Occupancy rates have been under pressure, averaged at 86% and 72% in Klang Valley and Penang respectively. Further upsides are unlikely, as the market takes time to digest the incoming supply. Landlords are delaying completion of their projects, in order to achieve commendable occupancy at opening date 21
Conclusion Quill Building 1 DHL 1
In Summary FY 2018 DPU of 8.08 sen declared translating to a DPU yield of 7.6%* FY 2018 DPU of 8.08 sen is 3.7% lower than the FY 2017 DPU of 8.39 sen Completed renewals due in 2018 with 75% renewals successfully in place MQREIT s portfolio occupancy rate as at 31 Dec 2018 was 93.0% * Based on unit price as at 31 December 2018 of RM1.06 per unit Year 2019 Prospects Ongoing Strategies Proactive asset management strategies to focus on tenant relations and continuous building improvements Prudent capital management strategies Continue to explore yield accretive acquisition opportunities 23
Thank you For enquires, please contact: Ms Joyce Loh (General Line: 603-2786 8080) (Fax : 603-2780 0098)