Axis REIT’s fundamentals remain positive


AXIS Real Estate Investment Trust’s (REIT) financial outlook looks set to improve with a robust outlook for its industrial assets and improving financial position from the proposed private placement exercise. 

Axis’ net profit for the third quarter of 2021 (3Q21) increased 10% year-on-year (YoY) and 3% quarter-on-quarter (QoQ) to RM35.5 million, bringing its nine months of 2021 (9M21) net profit to RM102.1 million (9% YoY). 

Maybank Investment Bank Research (Maybank IB Research) analyst Nur Farah Syifaa’ stated that Axis Reit’s earnings growth was mainly driven by rental contribution from its newly acquired assets and its positive rental reversions. 

“This, however, was offset by higher financing costs (20% YoY, 5% QoQ) from increased borrowings,” Nur Farah noted in a report on the trust yesterday. 

The analyst noted that Axis’ 3Q21 earnings were within Maybank IB’s and consensus’ forecast with the REIT’s 9M21 earnings at 71% or 76% of the financial year 2021 estimates. 

Axis REIT declared its third interim gross distribution per unit of 2.45 sen. The analyst added that Axis proposed placement of up to 188 million new units could raise about RM353.5 million.

“This will be used to repay part of its borrowings of RM349.6 million and provide Axis with sufficient headroom to make future acquisitions of new properties,” stated Nur Farah. 

She said the placement is expected to reduce Axis’ net gearing from 37% in 3Q21 to 27%. 

“We believe earnings from 4Q onwards remain resilient contributed by the newly completed acquisition (Xin Hwa warehouse) and ongoing acquired assets (logistics warehouse in Pasir Gudang),” she added. 

According to her, Axis’s estimated value for acquisition targets has increased 38% QoQ to RM187 million from RM135 million in 2Q21. 

“The selection of properties will continue to focus on Grade A logistics and manufacturing facilities, retail warehousing, as well as office, business parks and industrial properties,” she further said. 

Maybank IB maintained its ‘Buy’ call and earnings forecasts for Axis, as well as its dividend discount model-based target price of RM2.20. 

The investment bank noted that Axis remains its top pick in the segment supported by resilient rental income from the industrial properties.