Axis Real Estate Investment Trust’s (Axis REIT) acquisitions, especially in the increasing in-demand industrial property segment, is viewed positively by CGS-CIMB Research.
In its Company Flash note today (Oct 31), the research house said it expect better earnings in 4QF driven by acquisitions.
“We are positive on group’s acquisitions, especially in the increasing in-demand industrial property segment. As at 30 Sep 23, 13% of its portfolio was office and industrial (vs. 14% as at Sep 22).
“Logistics warehouse remained the largest at 55% of its total portfolio. We believe the upcoming pipeline of properties will help to offset the loss of income contribution from Axis Steel Center @ SiLC,” it said.
CGS-CIMB highlighted several developments in 3QFY23 including signed a sales and purchase agreement to acquire an industrial manufacturing facility in Sendayan, Negeri Sembilan for RM48 million (100% occupancy rate).
Axis REIT also handed over the Bukit Raja Distribution Center 2 development to Shopee Express Malaysia (not listed) in Aug 23 and accepted a letter of offer to acquire a hypermarket for RM25.74 million in Temerloh.
The research house reiterates it ADD rating, with an unchanged DDM-based TP of RM2.01 (CoE 7.3%), given its diversified property portfolio and exposure to industrial assets.
CGS-CIMB also noted that AXIS Reit 3QFY23 core net profit impacted by lower occupancy rate.
“The group reported a core net profit of RM37.3 million (-4.6% YoY; +10.5% QoQ), taking 9MFY23 core net profit to RM103.6m (-14.9% yoy).
“Occupancy rate stood at 92% as at Sep 23 compared to 95% in Sept 22. Our 9MFY23 core net profit came in at 65% of our FY23F forecast, excluding fair value changes on derivatives.
“However, we expect earnings to come in stronger QoQ in 4Q23F, following the completion of Bukit Raja Distribution Center 2, in Aug 23,” it said.
It added that as at end-Sep 2023, 51 out of 62 properties under management were at 100% occupancy rates, and the group has declared a DPU of 2.15 sen for 3QFY23, taking 9MFY23 DPU to RM6.25 sen. The stock offers FY23-25F yields of 5.4-5.9%.
“We continue to like its diversified portfolio consisting of logistics warehouse, industrial, manufacturing facilities and hypermarkets, as well as its early foray into the industrial property segment, which would allow the group to specialise in this increasingly important property segment, in our view.”
It added the downside risks include inability to secure a tenant for the vacant property and non-renewal of expiring leases.
