KUALA LUMPUR:Affin Hwang Capital research is positive on Axis Reits
plans to develop Axis Mega Distribution Centre Phase 2 into a grade-A distribution centre with green mark qualification and flexible modular space configuration.
"Based on several assumptions, we forecast the project to lift Axis REIT’s 2021E EPU by 4%," it said.
The research house maintained its buy call on Axis REIT with a higher target price of RM2.04 from RM1.90 previously after incorporating earnings constributions from Axis Mega DC2 from 2021E.
"At a 5.4% 2019E yield, Axis REIT’s valuation looks attractive, in view of its sector-leading 2019E EPU growth rate of 7.6%, solid assets occupancy, as well as the compression in MGS
yield (MREITs valuation is positive correlated to 10-year MGS prices)."
Affin Hwang added that Axis REIT stands to be a beneficiary from a Bank Negara cut in the overnight policy rate.
"Approximately 69% of its borrowings is based on floating rates, notably higher than peers’ 0%-35%.
"We estimate that a 25bps cut in the OPR will lift its full year EPU by 1.5%," it said.
However, the research house maintained its view that the central bank will maintain the OPR at 3.2% throughout 2019, despite the higher risk for a cut versus a hike.
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