Stable earnings outlook for Axis-REIT

HLIB Research said that the overall increased expenses this year for Axis-REIT will be offset by the commencement of new tenancies.

PETALING JAYA: Axis Real Estate Investment Trust’s (Axis-REIT) financing cost is expected to remain elevated, as the full-year impact of past overnight interest rate (OPR) hikes is expected to be felt in financial year 2023 (FY23).

However, its property operation expenditure (opex) will normalise going forward in tandem with the completion of heavy repair works.

The impact of the electricity tariff hike is expected to be miniscule on the trust’s portfolio, given most of its properties are single-tenant (77% of net lettable area or NLA) where the utility cost is borne by tenants, said Hong Leong Investment Bank (HLIB) Research.

The research house is of the view that the overall increased expenses this year for Axis-REIT will be offset by the commencement of new tenancies.

It said Axis Facility 2@Bukit Raja and Bukit Raja DC2 will commence their tenancies in mid-May and September, respectively, with a double-digit increment in rental rates.

HLIB Research added Axis-REIT’s management guided a positive step-up rate for the renewal of leases that are due for expiry this year (12.4% of total NLA).

After the release of its first-quarter 2023 (1Q23) earnings, several research houses adjusted their future earnings forecast for the trust. Most maintained their stock call and target price (TP) on the belief the outlook is positive for the REIT. Most research houses maintained their “buy’’ calls and TPs.

HLIB Research, RHB Research, MIDF Research and Maybank IB Research’s TP for Axis-REIT are RM2.23, RM2.14, RM2.06 and RM2.16 a unit, respectively.

RHB Research said Axis-REIT’s intent to buy a logistics warehouse for RM92mil in Kulim, Kedah, marked its first foray into the state, as assets in Selangor (46%) and Johor (38%) account for the majority of its footprint.

The research outfit said the trust had a further acquisition target value of RM140mil.

MIDF Research, meanwhile, maintained its earnings forecast for Axis-REIT’s FY23/FY24/FY25 as it sees a stable earnings outlook with rental income from industrial assets expected to remain steady going forward.

Maybank IB Research adjusted its FY23/FY24/FY25 net profit forecast earnings for the REIT by minus 6.6%, minus 2.8% and 0.3%, respectively.

UOB Kay Hian Research maintained its earnings forecast for Axis-REIT and expects a better second-half 2023, stemming from Shopee’s contribution, better occupancy and newly acquired assets.

It retained its “buy’’ call on the REIT with a TP of RM2.04 a unit based on a dividend discount model (required rate of return: 6.5%, terminal growth: 1.7%) with an implied yield of 4.8%.

Kenanga Research adjusted its core net income projections for the trust to RM162.7mil (5.8% fall) for FY23 and RM176.7mil (1.5% fall) for FY24. It has a “market perform’’ call with a TP of RM1.84.

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Axis-REIT , financingcost , OPR , Opex , portfolio , tenancies , earnings


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