PETALING JAYA: Axis Real Estate Investment Trust (Axis-REIT)’s growth prospects remain intact, with the company recently announcing financial results that were largely within expectations.
Hong Leong Investment Bank (HLIB) said, in a report to clients, that Axis REIT’s nine-month core net profit of RM92.8mil (+8.2%) was within its and consensus estimates.
“Overall, the improved performance was due to commencement of lease from newly acquired properties.
“We expect a resilient fourth quater with contribution from newly acquired properties, ” it said.
It noted that of the 51 properties that it owns, 39 enjoyed 100% occupancy while average portfolio occupancy remained stable at 92.7%.
Gearing meanwhile has increased to 31.9% (from 28.7% in FY2019) due to the acquisition of new properties.
HLIB said it believed the fourth quarter of the year would remain resilient contributed by newly-acquired properties.
“Axis-REIT’s growth prospect remains promising as the company continues to aggressively source and evaluate potential acquisition targets that are deemed investable.
“The selection of properties will continue to focus on grade A logistics facilities and manufacturing facilities with long leases from tenants with strong covenants as well as well-located retail warehousing in locations ideal for last-mile distribution, it said.
HLIB is maintaining its “buy” call on the stock with a target price of RM2.47.
Axis-REIT on Wednesday reported close to a 24% year-on-year jump in net profit to RM32.4mil for the third quarter ended Sept 30,2020 due to higher property income. Revenue was 6.1% higher at RM57.2mil for the quarter.
The REIT has proposed a third interim income distribution of 2.25 sen per unit, which includes a non-taxable portion of 41 sen per unit derived from capital allowances, industrial building allowances and tax-exempt profit income.
This will be payable Nov 30.
In its report on Axis-REIT, Kenanga Research said it favoured it for earnings stability during the pandemic given its exposure to the resilient industrial segment and the nature of its long-term leases in times of uncertainty.
That said, at current levels, it pointed out that Axis-REIT’s FY2021 gross yield of 4.6% is below large cap retail/office Malaysian REITs’ average of 5.5%.
At the close yesterday, Axis-REIT finished at RM2.13, valuing the company at over RM3bil.
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