3Q15 core profit came in within our/street’s expectations. Maintain BUY and DDM-based TP of MYR1.84 (10% upside). Although we think thatorganic growth would remain soft due to the persistently challenging market, we note that there is plenty of room for growth should the pipeline of potential assets for acquisition materialise. Furthermore, its FY16F dividend yield remains decent at 5.8%.

In line. Axis REIT registered 3Q15 core profit of MYR23.7m (+0.6% QoQ, +25.5% YoY), bringing 9M15 core profit to MYR69.8m, within our and consensus estimates. 3Q15 revenue came in strong (+26.4 YoY),mainly underpinned by its recently-completed acquisition of the MYR45m Axis Shah Alam DC2 asset on 31 Mar and contributions from three new assets that were acquired back in Dec 2014. However, finance cost also increased during the quarter due to the utilisation of additional financing facilities to fund these acquisitions. Axis declared a decent DPU of 2.2sen in 3Q15, still on track to meet our forecast.

Recent developments. Management is actively ramping up its efforts to improve the overall occupancy, especially for newly-refurbished assets such as Axis Business Park, which remains untenanted. Efforts are also being put in to improve the occupancy of assets which have occupancy rates of <60%. We expect the market to remain challenging amid the current macroeconomic headwinds. W e do note that the REIT is largely insulated from the oversupply of office space. Additionally, we expect the industrial segment to remain unexciting, due to a lack of new assets entering the market and the nature of the segment’s tenancies – which are mostly on a long-term basis. The REIT is also in the midst of completing two acquisitions which it has announced earlier this year.These acquisitions are expected to be completed by 4Q15. Meanwhile, itis still assessing the potential of several industrial assets with a total asset value of MYR270m. Thus, we think that the recently-approved mandate for the placement of new units will be used to beef up its warchest for future acquisitions.

Earnings forecast. Unchanged.

Maintain BUY. We maintain our BUY call and DDM-based TP of MYR1.84 (10% upside). We reiterate that more yield-accretive asset injections would be the re-rating catalyst for the REIT amid the current challenging environment.