Axis REIT’s (AXREIT) 2QFY22 realised net profit came in at RM42.7m (+38.4% YoY, +10.2% QoQ) which was within our and consensus expectations. 1HFY22 net profit of RM81.5m (+29.3% YoY) constituted c.52% of our and consensus full year estimates. Net property income (NPI) improved 18.3% YoY to RM63.2m mainly due to rental from newly-acquired properties, commencement of new tenancies at Axis Industrial Facility @ Rawang and D8 Logistics Warehouse, in addition to positive rental reversion and sale of recycled materials arising from the demolition work at Bukit Raja Distribution Centre 2. In 2QFY22, the Group completed the acquisition of DW1 Logistics Warehouse which increased its portfolio size to 61 properties. It also announced distribution per unit (DPU) of 2.55sen in 2QFY22, bringing YTD DPU to 4.97sen. All told, no change to our earnings estimates as Neutral call is also maintained with DDM-derived TP unchanged at RM1.96.

• Completed three asset acquisitions YTD. AXREIT added three properties to its portfolio in recent months, namely the acquisition of Pasir Gudang Logistics Warehouse 2 for RM32.0m on 7 March 2022, Indahpura Facility 4 for RM16.3m on 8 March 2022 and DW1 Logistics Warehouse for RM390.0m on 25 April 2022. Separately, it also embarked on the development of Bukit Raja Distribution Centre 2 into a 620,096 sf logistics warehouse, with a 15-year lease signed with Shopee Express Malaysia Sdn. Bhd, while accepting the Letter of Offer to acquire a manufacturing facility for RM41m, located in Klang, Selangor. Space under management is currently 12.5m sf, with average occupancy of 96%.

• Acquisition targets worth RM120m in the pipeline. The Group is still looking to expand its asset portfolio with focus on Grade-A logistics facilities and manufacturing facilities with long leases from tenants with strong covenants. The assets targeted will be well-located logistics warehousing in locations ideal for last-mile distribution. In addition, the Group is also looking at office, business parks and industrial properties with potential for future enhancement.

Source: PublicInvest Research - 21 Jul 2022