KUALA LUMPUR (Feb 13): Hektar Real Estate Investment Trust (Hektar REIT) saw its net profit fall 31.8% to RM17.58 million for its fourth quarter ended Dec 31, 2014 (4QFY14) from RM25.78 million a year ago, mainly due to higher property operating expenses which had increased 5.6% to RM48.7 million during the quarter.

The trust attributed the higher property operating expenses to the electricity tariff hike increase of 17% which took effect on Jan 1, 2014.

As a result, Hektar REIT's earnings per unit was lower at 4.39 sen from 6.44 sen in 4QFY13.

Revenue for 4QFY14, however, rose 1.3% to RM30.83 million from RM30.43 million in 4QFY13.

For the 12 months period (FY14), Hektar REIT's (fundamental: 0.45; valuation: 3) net profit fell 14.3% to RM50.39 million from RM58.77 million in FY13. Earnings per unit was lower at 12.58 sen compared with 14.67 sen.

Revenue, however, rose 1.5% to RM121.99 million from RM120.24 million in FY13.

Despite the weaker performance, Hektar REIT declared a final income distribution of 2.7 sen per unit, amounting to RM10.82 million, payable on March 20.

“Based on the closing price of RM1.49 on Dec 30, 2014, DPU for the year represented a distribution yield of approximately 7%,” Hektar REIT said in a statement today.

“The recent electricity tariff hike coupled with the temporary drop in revenue caused by the Asset Enhancement Initiatives (AEI) at Central Square (in Sungai Petani, Kedah) had an adverse overall impact to our overall profitability in FY14,” Hektar REIT chief executive officer Datuk Jaafar Abdul Hamid said.

“With the upcoming completion of the refurbishment at Central Square, we look forward to Central Square contributing strongly to our growth in 2015,” he added.

Moving forward, Hektar REIT said the retail environment in 2015 is expected to remain challenging and together with inflationary pressures that may impact its earings.

However, it believes that Central Square’s AEI, which expected to fully complete by 2QFY15, will improve its revenue.

Hektar REIT shares fell one sen or 0.66% to close at RM1.51 today, valuing it at RM608.96 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)