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Ticker/ Stock Code: AXREIT (5106)

Portfolio Type: Industrial, Office, Warehouse
Total Portfolio: Fifty-four (54)
Space under management: 10,514,065 square feet

1.          Portfolio Diversification

• In terms of geographical diversification, AXIS REIT property portfolio is spread out mainly the prime industrial areas in Peninsula Malaysia and largest being in Selangor ( mainly Petaling Jaya, Subang, Shah Alam and Klang) and Johor.

2.          Portfolio Diversification by Property Type

The focus of Axis REIT property portfolio remained on Industrial Properties (Warehousing/ Logistics and Manufacturing facilities) which comprise of above 80% of the REIT total property portfolio.

3.          Average Occupancy Rate

Axis REIT property portfolio average occupancy rate stood at average 82.09% and we could observe a slight drop from 2019, probably due to the recent pandemic that have affected most of the retail, property and REIT business. However, the resilience about Axis REIT is that majority of their portfolio involved industrial and manufacturing facilities which is consider as essential services and in most circumstances, the tenure yield a longer period.

4.        Weighted Average Lease Expiry (WALE)

As mentioned in our previous post (https://jawplace.com/real-estate-investment-trust-reit-part-1/), a good WALE will ensure that the occupancy rate of a REIT remains at high level and growing rental income, which will distribute more value to shareholders.

As at 31 December 2019, the REIT property portfolio WALE (by Rental) had risen to approximately 6.0 years, from 5.5 years in 2018. A consistent increase in WALE would be favourable to investors who look to invest in a particular REIT.

5.          Land Tenure and Lease Management

• Approximately 36.5% of Axis REIT property portfolio is situated on freehold land. With the remaining 63.5% of its portfolio sitting on leasehold titles.
• On average, AXIS REIT property portfolio had 51 years to expiry, with the shortest remaining lease period at a comfortable 30 years.

6.          Financial Analysis (Specifically Dividend Yield)
When investing in a REIT, assuming everything being equal; ceteris paribus and business wise is fair, Investors would prefer to review the projected Dividend Yield if they were to invest their money in a REIT. The below is the projected dividend yield based on the following assumptions:

• MCO 2.0 would probably affect their short term profit in Q1 of 2021. Assuming a decline in their profit to decline by approximately 20/30% in Q1 and Q2 of 2021 (worst case scenario – which is almost equivalent to what has happened in the first MCO).
• A recovery in earnings in Q3 and Q4 of 2021 due to higher occupancy rate to above 90% (traditionally, managed to maintain the occupancy rate at above 90%) by 10/20% (conservative incremental in the REIT's earnings).
• Assuming that there won’t be potential MCO (i.e. MCO 3.0) enforced within our Country in Q2 or Q3 of 2021.
• 90% dividend payout from their projected profit in 2021.

With the above assumptions, the projected dividend yield is as follows:

With the above assumptions, the potential dividend yield that investors should be expecting from Axis REIT in 2021 would be approximately 5.94%. However, should the economy recovers at an earlier or accelerated pace, we should expect a 6% to 7% dividend yield from Axis REIT.

For risk adverse investors who are planning to park most of their money in Fixed Deposit with below 2% interest rate, perhaps, could consider analysing most of the REITs and see which REITs will yield a better return in terms of dividend.

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