Period  4Q13 / FY13

Actual vs. Expectations  FY13 realised net income (RNI) of RM84.5m came in within consensus but marginally below our expectations, making up 97% of consensus’ RNI and 94% of ours. The result was slightly disappointing versus our expectations due to higherthan- expected trust expenditure in terms of manager’s fees and administrative expense.

Dividends  4Q13 GDPS of 4.7 sen was declared, which includes a 0.4sen non-taxable portion, based on 99% payout. Total FY13 GDPS amounted to 18.5 sen (6.5% yield) which is also slightly below expectation due to the reasons mentioned above and is marginally lower (-1% YoY).

Key Results Highlights QoQ, RNI increased marginally by 1% to RM21.5m despite topline increasing by 2% to RM36.5m. This was due to higher operating cost (+6%) to RM5.4m and higher expenditure (+14%) as a result of higher administrative expense and manager’s fees.

 YoY, FY13 RNI increased by 6% to RM84.5m on the back of higher gross rental income from existing assets. Income after tax increased by 8% due to a 13% increase in fair value adjustments – the three assets with the highest gains were Menara Axis (RM4.8m), Tesco Bukit Indah (RM3.0m) and Wisma Academy parcel (RM3.9m).

Outlook  We do not discount the possibility of an acquisition in the near future as AXREIT has yet to complete the share placement exercise which they have been granted an extension until April 2014 to allot and issue 90,762,819 units. Additionally, they typically acquire assets shortly after disposal; recall, they have announced disposal of Axis Plaza in Dec-13. However, we think that acquisitions may be challenging due to the current low cap rate environment. We will be getting further clarity on the matter pending today’s analyst briefing.

Change to Forecasts No major changes to FY14E estimates. Note that our FY14E estimates accounts for the gains on disposal of Axis Plaza and the loss of Axis Plaza income starting mid-FY14.

Rating Maintain OUTPERFORM

Valuation  Our TP has been slightly adjusted lower to RM3.11 (from RM3.13) due to the slightly increased share base (+1%) due to the IDRP issuance. However, the basis of our TP remains the same based on FY14E target gross yield of 7.3%. We believe investors will chase for the gains on disposal of Axis Plaza. However, post the payout to shareholders and in the absence of significant acquisitions, we may review our CALL/TP again.

Risks to Our Call Office sector supply glut in the Klang Valley.

 Rising bond yield environment.

Source: Kenanga