INVESTMENT HIGHLIGHTS

• FY18 CNI of RM112.5m was in-line

• CNI for the full year jumped 22%yoy as revenue climbed 21%yoy to RM204.4m

• 4QFY18 CNI increased by 35%yoy and 7%qoq to RM31.8m

• Earnings forecast fine-tuned

• Maintain NEUTRAL with a higher TP of RM1.62 (from RM1.55)

FY18 CNI of RM112.5m was in-line. Axis REIT’s cumulative CNI of RM112.5m came in within ours at 100% but slightly above streets’ expectations at 107% of full year estimates. An interim DPU of 2.45 sen was announced, bringing DPU year-to-date to 8.74 sen, which is also within our forecast.

CNI for the full year jumped 22%yoy as revenue climbed 21%yoy to RM204.4m. The increase in revenue can be attributed to the addition of the Senawang factory, Beyonic i-Park Campus Block E and Indahpura Facility I, Axis Shah Alam DC 4 and the Axis Aerotech Centre. On top of that, the overall rental reversion rate for Axis’ portfolio remains positive with occupancy rate stayed above 94%.

4QFY18 CNI increased by 35%yoy and 7%qoq to RM31.8m in tandem with revenue that increased by 40%yoy to RM59.5m. Our CNI excludes the revaluation gain of RM35.2m. The higher revenue can be attributed to higher property income from new acquisitions and improved property income from existing assets.

Earnings forecast fine-tuned. Although FY18 earnings were within our expectation, we made a slight adjustment to our earnings forecast for FY19F from RM123m previously to RM122m following the latest set of results.

Maintain NEUTRAL with a higher TP of RM1.62 (from RM1.55 previously) as we roll over our base year. Other than that, we keep our valuation method which is based on the Dividend Discount Model (Required rate of return: 7.5%, Perpetual growth rate: 1.0%), unchanged. Dividend yield for Axis is estimated at 4.3%. While we like Axis REIT for it stable recurring income, we think that high borrowing costs may partially offset the additional income contribution from the new assets.

Source: MIDF Research - 23 Jan 2019