Axis REIT’s (AXREIT) 4QFY23 realised net profit came in at RM42.3m (+14.2% YoY, +15.0% QoQ) which is largely within our and consensus expectations. In FY23, the Group’s realized net profit of RM146.2m (-7.6% YoY) constitutes 101% of our and consensus full year estimates. The Group’s weaker profits for the year were attributed to a weak 1HFY23 due to lower occupancy for Axis Shah Alam Distribution Centre 3 (one of the tenancies expired in December 2022), termination of lease agreement with Yongnam Engineering Sdn Bhd (the lessee of Axis Steel Centre @ SiLC) and higher costs incurred due to on-going development projects and major enhancements implemented. All told, we keep our earnings estimates unchanged and maintain our Neutral call with DDMderived TP unchanged at RM1.96.

• FY23 Net Property Income is flattish YOY as 1HFY23 profits were weak due to lower occupancy for Axis Shah Alam Distribution Centre 3, termination of lease agreement with Yongnam Engineering Sdn Bhd (the lessee of Axis Steel Centre @ SiLC) and higher costs incurred during the period. The Group’s subsequent quarters experienced increases in property income however, mainly lifted by the completion of the development of Bukit Raja Distribution Centre 2 with lease commencement on 1 August 2023 and starting rental of RM1.35m per month, new tenancy for Axis Shah Alam Distribution Centre 3 in August 2023 and other new tenancies. In FY23, a total of RM172.7m has been incurred for major capital expenditure mainly for enhancement of properties of AXREIT and for the development costs of BRDC2 and the ongoing development of AMDC (Phase 2).

• Acquisition targets worth RM170m in the pipeline. As per the latest guidance, we understand that the Group is still looking to expand its asset portfolio with focus on Grade-A logistics facilities and manufacturing facilities with long leases from tenants with strong covenants. The assets targeted will be well-located logistics warehousing in locations ideal for lastmile distribution. In addition, the Group is also looking at office, business parks and industrial properties with potential for future enhancement. During the quarter under review, the property portfolio size of AXREIT remains at 62 properties as at end-23 but has since increased to 63 properties as at 16 January 2024 following the acquisition of Axis Hypermarket @ Temerloh.

Source: PublicInvest Research - 24 Jan 2024