Axis REIT’s (AXREIT) 4QFY22 realised net profit came in at RM36.8m (-0.3% YoY, -7.0% QoQ), which was in line with our and consensus expectations. In FY22, Group net profit of RM157.9m (+150.5% YoY) constituted c.100% and c.97% of our and consensus full year estimates. Net property income (NPI) increased by 16% YoY in FY22 to RM241.7m mainly due to rental from newly acquired properties, commencement of new tenancies at Axis Industrial Facility @ Rawang & D8 Logistics Warehouse and positive rental reversion recorded during the year. NPI was also lifted by the sale of recycled materials arising from the demolition work at Bukit Raja Distribution Centre 2. This year, Group portfolio size increased by 4 to a total of 62 properties valued at RM4.26bn. Distribution per unit (DPU) of 2.33sen was announced in 4QFY22, bringing YTD DPU to 9.75sen. All told, no change to our earnings estimates. Maintain Neutral call with DDM-derived TP unchanged at RM1.96.

• One new asset added in Q4FY22. The Group completed the acquisition of Axis Industrial Facility 1 @ Meru for RM41.0m in Q4FY22. We understand that it has also embarked on the development of Axis Mega Distribution Centre (Phase 2), a logistics warehouse of approximately 584,112sf to be constructed on the remaining vacant land. To recap, AXREIT added three properties to its portfolio earlier, 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. Space under management is currently 12.7msf, with average occupancy of 95% (from 95% in Q3FY22).

• 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 - 20 Jan 2023