INVESTMENT HIGHLIGHTS

• 2QFY19 results within expectations

• CNI for 1HFY19 rose 9%yoy to RM55.6m

• 2QFY19 CNI increased by 8%yoy to RM29.1m

• Maintain NEUTRAL with an adjusted TP of RM1.82

2QFY19 results within expectations. Axis REIT’s CNI of RM55.6m makes up 46% of ours and consensus’ full year estimates. DPU for the quarter is 2.36 sen, bringing year-to-date DPU to 4.71 sen. This is also in-line with our expectation.

CNI for 1HFY19 rose 9%yoy to RM55.6m as revenue climbed 17%yoy to RM108.0m. The higher on-year CNI can be attributed to four new properties added into its portfolio since the beginning of the year. CNI for the period did not rise as much as the jump in revenue partially due to financing cost that increased by 27.5%yoy.

2QFY19 CNI increased by 8%yoy to RM29.1m on the back of revenue that climbed 14%yoy to RM54.2m. Sequentially, CNI was up by 9%qoq while revenue was higher by 1%qoq. Gearing level reached 42.4% vs 41.4% as at end December 2018.

Earnings estimate for FY20F increased by 1.5% while FY19F full year CNI is maintained. We have raised our FY20F CNI estimate by 1.5% RM129.0m to factor in the new acquisition in Bayan Lepas Free Trade Industrial Zone as well as the development project for FedEx in Penang. We have also introduced our FY20F numbers.

Maintain NEUTRAL with revised TP of RM1.82 (from RM1.73 previously) as we roll over our base year to FY20F. Our required rate of return is maintained at 7.5% while terminal growth rate of 1.6% is unchanged. As a result, our Dividend Discount Model-derived TP is adjusted to RM1.82 from RM1.73. Dividend yield for Axis is estimated at 5.0%. While we like Axis for its stable recurring income, we believe that the unit price upside is limited at this juncture.

Source: MIDF Research - 25 Jul 2019