Highlights

Axis REIT - Within Expectations

Date: 21/05/2020

Source  :  PUBLIC BANK
Stock  :  AXREIT       Price Target  :  1.77      |      Price Call  :  HOLD
        Last Price  :  2.14      |      Upside/Downside  :  -0.37 (17.29%)
 


Axis REIT’s (AXREIT) 1QFY20 realised net profit of RM29.3m (+10.1% YoY, - 1.6% QoQ) is within our and consensus expectations, constituting c.24% and c.23% of our and consensus full year estimates. Increase in property income was mainly due to the commencement of leasing in Axis Facility @ Batu Kawan on 1 March 2020 and rental from 4 newly-acquired properties completed since end of 3Q2019. This has offset the rental loss from Axis Industrial Facility @ Rawang as the tenant had re-delivered vacant possession in July 2019. AXREIT announced an income distribution of 2.1sen per unit during the quarter. All told, our earnings estimates are kept unchanged. We maintain our Neutral call and DDM-derived TP of RM1.77. Key catalyst for the Group is Phase 2 of the Axis Mega Distribution Center.

  • 1QFY20 revenue rose 1.9% YoY to RM54.8m mainly due to the commencement of leasing in Axis Facility @ Batu Kawan on 1 March 2020 and rental from 4 newly-acquired properties completed since end of 3Q2019. During the quarter, a total of RM936k had been incurred for enhancement of the properties of Axis-REIT while a total of RM4k had been incurred for the completed development project i.e. FedEx Development Project.
  • Recent developments. In 1QFY20, the Group expanded its portfolio size by 2 (Axis Facility 2 @ Nilai for RM50.0m on 28 February 2020 and Axis Facility 2 @ Bukit Raja for RM37.0m on 17 March 2020) to a total of 50 properties with current market value estimated at RM3.1bn. It has also received the acceptance of Letter of Offer to acquire a manufacturing facility for RM25.5m located in Johor Bahru.
  • Limited negative pandemic impact. We believe that that AXREIT could see its portfolio expand to 52 assets by mid-2020 and we understand that the Group is still eyeing acquisitions supported by recent capital-raising which has buttressed its balance sheets (net gearing at c.29.6%). We understand that it has c.18% of its NLA which is due for renewal in FY20, out of which c.78% of the NLA are single-tenants. So far, we understand that about half of its tenants under “essential” categories have been paying full rent. Management is giving deferments for the remaining non-essential business tenants by 1-2 months to mitigate their cash-flow constraints. The retail assets only constitute c.4% of the Group’s total NLA and hence should see limited negative impact from Movement Control Order (MCO)-induced closures.

Source: PublicInvest Research - 21 May 2020

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AXREIT 2.14 +0.02 (0.94%) 212,100 

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