KEY INVESTMENT HIGHLIGHTS

• 9MFY24 earnings within expectations
• Earnings growth driven by newly acquired assets
• Earnings forecast maintained
• Maintain BUY with an unchanged TP of RM2.14

9MFY24 earnings within expectations. Axis REIT 9MFY24 core net income of RM120.7m came in within expectations, making up 78% and 74% of our and consensus full year estimates respectively. Axis REIT announced third distribution per unit (DPU) of 2.35sen (ex-date: 11 November 2024) for 3QFY24, bringing total DPU to 6.90sen in 9MFY24.

Earnings growth driven by newly acquired assets. Sequentially, 3QFY24 core net income increased to RM40.8m (+4.8%qoq) mainly due to contribution from newly acquired assets namely Axis Vista 2, Axis Industrial Facility @ Batu Caves and Axis Industrial Facility @ Sendayan.

On yearly basis, 3QFY24 core net income was higher (+8.1%yoy), bringing 9MFY24 cumulative core net income higher at RM120.7m (+14.2%yoy). The higher earnings were mainly driven by lease commencement of Bukit Raja Distribution Centre 2, positive rental reversion and contribution from five newly acquired assets. Meanwhile, Islamic financing cost increased (+18.7%yoy) in 9MFY24 due to additional financing for acquisition of assets and increase in OPR by 25bps in May 2023.

Earnings forecast maintained. We maintain our earnings forecast for FY24F/25F/26F. Earnings prospect for Axis REIT is expected to remain stable going forward as earnings contribution from industrial assets are resilient. The healthy demand for industrial space underpins positive rental reversion and thus support earnings growth in the medium to long term. Besides, the active acquisition strategy of Axis REIT will also drive earnings and DPU growth. Note that Axis REIT has total estimated value of target acquisitions of RM220m.

Maintain BUY with an unchanged TP of RM2.12. We maintain our TP for Axis REIT at RM2.12, based on Dividend Discount Model (DDM). We remain positive on Axis REIT as we see stable prospect for Axis REIT which is driven by the positive outlook for industrial assets in Malaysia.

Hence, we maintain our BUY call on Axis REIT. Meanwhile, distribution yield is estimated at 4.3%.

Source: MIDF Research - 29 Oct 2024