Axis REIT's (AXREIT) 4QFY24 realised net profit came in at RM42.4m (0.1% YoY), which largely within our and consensus expectations. For FY24, the Group's realised net profit of RM162.8m (+11.3% YoY) constitutes about 99% of our and consensus full year estimates. Net property income (NPI) rose 15.4% YoY to RM76.3m mainly due to, among others, lease commencement of Bukit Raja Distribution Centre 2 in August 2023 with a monthly rental of RM1.35m, positive rental reversion of certain assets and completed acquisitions of assets (such as Axis Hypermarket @ Temerloh on 16 January 2024; Axis Facility 1 @ Bukit Raja on 31 May 2024; Axis Vista 2 on 15 July 2024; Axis Industrial Facility @ Batu Caves on 15 July 2024; and Axis Industrial Facility @ Sendayan on 23 July 2024) and would be more if not for the loss of rental income from termination of lease agreement at Axis Steel Centre @ SiLC, with vacant possession of the property taken back on 7 June 2023. All told, we keep our earnings estimates unchanged and maintain our Neutral call with TP adjusted from RM1.96 to RM1.85 post the completion of 263m placement shares, or yielding about 5%.

• 4QFY24 NPI rose 8.8% YoY to RM87.4m, mainly due to contribution from newly acquired properties, new tenancies from AMDC (Phase 2) and positive rental reversion from the existing portfolio. Correspondingly, property expenses rose 3.2% to RM11.8m mainly due to higher maintenance cost. The disposal of Axis Steel Centre @ SiLC completed on 12 December 2024 resulted in a total realised net gain on disposal of RM66k. Non-property expenses was RM31.7m, or 13% higher mainly due to additional financing costs incurred for newly acquired properties and higher manager and trustee's fees following the increase in net asset value from the completion of share placement in November 2024 and the increase in fair value of investment properties.
• Looking for more assets. The Group, via a private placement to raise up to RM455m, is expected to have a balance sheet headroom of RM1b, which will likely help its asset growth over the next few years. In 1HFY24, AXREIT two completed acquisitions - Axis Hypermarket @ Temerloh in January and Axis Facility 1 @ Bukit Raja in May. In April, it sold Axis Steel Centre @ SiLC to a data centre operator for a lump sum of RM162m in cash. In 2HFY24, the Group completed three acquisitions worth RM173m in July, namely Axis Vista 2, a 4½-storey detached building with existing use as a 3S Service Centre; Axis Industrial Facility @ Batu Caves; and Axis Industrial Facility @ Sendayan, Negeri Sembilan. Further, it is expecting to complete the purchase of three more assets worth RM471.6m, which will raise its financing ratio to 44% from 36% as at 1HFY24.

Source: PublicInvest Research - 24 Jan 2025