Axis REIT’s (AXREIT) 2QFY24 realised net profit came in at RM39.4m (+17.1% YoY, -7.0% QoQ) which is largely within our and consensus expectations. In 1HFY24, Group realised net profit of RM79.3m (+20.0% YoY) constitutes about 48% of our and consensus full year estimates. Net property income (NPI) in 1HFY24 is higher by 11.5% YoY mainly due to commencement of lease for Bukit Raja Distribution Centre 2 (lease started in August 2023 with a monthly rental of RM1.35m), positive rental reversion recorded in FY23 and acquisition of Axis Hypermarket @ Temerloh completed on 16 January 2024. However, Group profits were weighed by the loss of rental income from termination of lease agreement at Axis Steel Centre @ SiLC, with vacant possession of the property taken back on 7 June 2023 though it managed to offload the asset in April 2024 for RM162m to a data center operator. All told, we keep our earnings estimates unchanged and maintain our Neutral call with DDM-derived TP unchanged at RM1.96.

• 1HFY24 NPI rose 11.5% YoY mainly due to commencement of lease for Bukit Raja Distribution Centre 2 (lease started in August 2023 with a monthly rental of RM1.35m), positive rental reversion recorded in FY23 and acquisition of Axis Hypermarket @ Temerloh completed on 16 January 2024. Property expenses were higher mainly due to increase in assessments and an increased number of properties in the portfolio. Investment properties currently stand at RM4.56bn while portfolio size increased by 2 to a total of 64 properties as at 30 June 2024, further increasing to 67 properties as at 23 July 2024. As such, space under management increased by 802,394sf as at 30 June 2024 to 14,153,562 sf, housing about 177 tenants

• Assets in the pipeline. In 1HFY24, AXREIT signed sale and purchase agreements to acquire few assets which among others include: 1) an industrial facility in Petaling Jaya, Selangor for RM69m on 23 May 2024 (acquisition completed on 15 July 2024, with the property now known as Axis Vista); 2) an industrial facility in Batu Caves, Selangor for the proposed purchase consideration of RM56m on 23 May 2024 (completed on 15 July 2024, with the property now known as Axis Industrial Facility @ Batu Caves); 3) a manufacturing facility in Sendayan, Negeri Sembilan for a proposed purchase consideration of RM48m on 25 October 2023 (completed on 23 July 2024, with the property now known as Axis Industrial Facility @ Sendayan). Pending deal completions include: 1) a manufacturing facility in Kawasan Perindustrian Bukit Raja, Selangor for RM313m on 22 April 2024; 2) a storage yard in Kawasan Perindustrian Bukit Raja, Selangor for RM38.8m on 22 April 2024 and 3) disposal of Axis Steel Centre @ SiLC, Johor for RM162m on 24 April 2024.

Source: PublicInvest Research - 24 Jul 2024