Sunday Short Slices (3S) - $AMFIRST / 5120 (AMFIRST REAL ESTATE INVESTMENT TRUST) (Small Cap at RM226.5 mil)
Q4 result released last Friday (14/4/2023) - What's interesting?
QOQ profit jumped 92.7%, YOY profit leaped 169.4%

1. Background:
AMFIRST is a Real Estate Investment Trusts (REIT) with investment properties in commercial space around KL, Subang Jaya, Cyberjaya and others. Listed in 2006, it currently has 8 investment properties valued at RM1.5 bil. Some prominent names in the portfolio are:
+ AmBank Group offices
+ The Summit Subang USJ
+ Prima 9 & 10 in Cyberjaya

2. Profit jumped explained:
YOY - Higher (accounting) profit due to much lower "Change in fair value of investment properties". Like every investment trust be it equity, bonds or properties, the value of these asset classes will have to be revalued every quarter and any changes to them will be reflected into income statement. Hence you can say that these gain/loss are "not real" until they are disposed or sold.

Change in fair value of investment properties:
Q4 2023 - Loss of RM337K
Q4 2022 - Loss of RM19.7 mil (due to MCO impact on commercial space market value)

Since the purpose of this indicator is to explain the volatility experienced by the Trust and not a real P/L experiences, it is a meaningless profit indicator. I remember Buffett wrote something similar to caution his audience on this when the value of his investment portfolio has gone down significantly. While this has to be recorded into his P/L statement and impacted the bottom line, they are not real impact! Especially when he takes long term view on his investment and not short term (quarterly) view.

So what would be a better indicators for profitability?
+ Realised net income from operation
+ Realised capital gain from disposal of investment properties
+ Operating cash flow / Free cash flow

QOQ - Higher (accounting) profit due to significant realised loss in previous quarter, and better occupancy rate in certain properties.

3. Personal Take:
Commercial space for offices and retail will continue to face tough market environment. While recovery took place from MCO as footfall increases, and working in office returned, consumer spending will experience slow down with rising inflation and slower economic growth dampening consumer sentiment.