Axis Reit, 1HFY22 RNI of RM81.5m came in within the market expectations at 53.7% and 53.4% of Kenanga’s full-year forecast and full-year consensus estimates respectively, while 1HFY22 dividend of 4.97 sen is also within at 53.6% of full-year forecasts.
The broking house continues to like AXREIT as its rental reversion outlook remains strong within the positive single-digit range on healthy occupancy of 96%, active acquisition trail, while downside risks are limited on low lease expiries (20-11% p.a. in FY22-23). There will be no changes to earnings estimates Kenanga adds.
It also maintains MARKET PERFORM and TP to RM1.95 on a 10-year MGS target to 4.5% with no adjustment to the TP based
on ESG given a 3-star ESG rating as appraised.
Results’ highlights. YoY, top-line was up by 17% on rentals from four newly acquired properties, the commencement of new tenancies at Axis Industrial Facility @ Rawang and D8 Logistics Warehouse, and on the back of positive rental reversions. As a result, bottom line increased by 29.3% despite higher financing cost (+7.3%) in tandem with higher borrowings for new acquisitions. QoQ, top-line was up by 8.9% on positive reversions and completion of one property in April 2022. All in, CNP was up by 10.2% on slightly lower expenditure (-7.1%). Group gearing increased to 0.36x (from 0.29x) post the recent acquisition of DW1 Logistics Warehouse in Johor.
FY22-23 is expected to see minimal leases expiring at 20-11% of portfolio NLA. AXREIT is continuously eyeing more industrial developments, The Bukit Raja Distribution Centre 2 lease with Shopee Express Malaysia Sdn Bhd (development value of approximately RM250m) should commence by August 2023 while the Group is eyeing to complete the acquisition of a logistics warehouse in Klang for RM41m by 2H 2022. The Group is eyeing an additional RM120m worth of industrial assets acquisitions, focusing on Grade A logistics located in Selangor, Penang and Johor and will continue to target acquisitions with
net yield of c.6.5-7.0%.
Kenanga, continues to like AXREIT’s and has awarded it the thinnest spread under our coverage of 0.8ppt (vs. peers of +1.0ppt to +4.2ppt) due to its: (i) extremely stable earnings profile during this pandemic from exposure to the resilient industrial segment, (ii) minimal lease expiries (20-11% of portfolio p.a.) in FY22-23, (iii) long-term leases during these uncertain times (WALE of 5.7 years vs. prime retail REITs’ WALE of c.2-3 years), (iv) active acquisition trail allowing for strong YoY growth of 10% p.a. vs. organic growth of 2-3% p.a. and (v) low gearing position of 0.36x (vs. MREITS’ gearing limit of 0.60x) enabling it to take advantage of potential acquisition opportunities under the challenging market conditions.
