Axis REIT reported a steady set of results – 6M19 realised net profit grew 20% yoy to RM57.8m on contributions from Nestle’s lease at Axis Mega DC, Axis Aerotech Centre @ Subang, and other new assets. Tracking a higher realised EPU, management has declared 4.71 sen DPU in 6M19, 20% higher yoy. Overall, the results are within market and our expectations. Maintain BUY with an unchanged price target of RM2.04. With 5.4% yield for 2019E, the stock looks attractive in view of its sector-leading 2019E EPU growth of 7.6% and solid asset occupancy.

Higher 6M19 Realised Net Profit of RM57.8m (+20% Yoy)

Axis REIT reported a steady set of results – 6M19 realised net profit grew by 20.1% to RM57.8m on higher revenue (+16.4% yoy), driven by contributions from Nestle’s lease at Axis Mega DC (commenced on 1 June 2018) and other newly acquired assets (ie, Axis Aerotech Centre @ Subang, Beyonics i-Park Campus Block E, Senawang Industrial Facility). Management has declared 2.36 sen DPU for 2Q19, thereby lifting its 6M19 DPU to 4.71 sen (+19.5% yoy). Overall, the results are within market and our expectations: Axis REIT’s 6M19 realised net profit accounted for 47%- 48% of the street’s and our full-year earnings forecasts.

Sequentially, 2Q19 Earnings and DPU Were Flat

Sequentially, Axis REIT’s 2Q19 realised net profit came in 0.3% higher (qoq) at RM28.9m on the back of 0.4% growth in revenue. In tandem, Axis REIT raised its DPU by 0.4% qoq to 2.36 sen.

Maintain BUY With An Unchanged DDM-derived TP of RM2.04

We maintain our earnings forecasts, BUY rating and DDM-derived price target of RM2.04. We continue to like Axis REIT for its industrial / warehouse asset portfolio, strong management team, sector-leading EPU growth in 2019E and attractive 5.4% yields for 2019E and 2020E.

Key Risks

Key downside risks: lower-than-expected asset occupancy rates, further weakening of the office market, delay in securing tenant(s) for Axis Mega DC 2, and an unexpected increase in the OPR / 10-year MGS yield.

Source: Affin Hwang Research - 25 Jul 2019