Axis REIT (AXREIT) delivered 3QFY22 realised net profit of RM39.6m (+6.0% YoY, -7.3% QoQ) which came in within our and consensus expectations. YTD, Group 9MFY22 net profit of RM121.1m (+92.1% YoY) constituted c.77% of our and consensus full year estimates. The Group’s net property income (NPI) improved 12.5% YoY in 3QFY22 to RM61.5m, again attributed to rental from newly-acquired properties, commencement of new tenancies at Axis Industrial Facility @ Rawang and D8 Logistics Warehouse. Earnings growth was also driven by positive rental reversion and sale of recycled materials arising from demolition works at Bukit Raja Distribution Centre 2. This year, the Group’s portfolio size has increased by 3 to a total of 61 properties valued at RM4.08bn. Distribution per unit (DPU) of 2.45sen was declared in 3QFY22, bringing YTD DPU to 7.42sen. All told, no change to our earnings estimates with Neutral call maintained and DDM-derived TP unchanged at RM1.96.

• No new asset addition in 3QFY22. To recap, AXREIT added three properties to its portfolio YTD, 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 95% (from 96% in 2QFY22).

• 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 offices, business parks and industrial properties with potential for future enhancement.

Source: PublicInvest Research - 20 Oct 2022