KEY INVESTMENT HIGHLIGHTS

• FY24 earnings within expectations
• Ended FY24 on a positive note
• Earnings forecast revised marginally upwards
• Maintain BUY with a revised TP of RM2.02 from RM2.14 after considering of larger share base post private placement

FY24 earnings within expectations. Axis REIT FY24 core net income of RM162.7m came in within expectations, making up 105% and 100% of our and consensus estimates respectively. Axis REIT announced distribution per unit (DPU) of 2.37sen for 4QFY24, bringing total DPU to 9.27sen in FY24 which translates into gross distribution yield of 5.3%.

Ended FY24 on a positive note. Sequentially, 4QFY24 core net income was marginally higher at RM42m (+3%qoq) mainly due to contribution from newly acquired assets in Taman Perindustrian Pulau Indah.

Nevertheless, earnings per unit (EPU) was lower (-10.5%qoq) as Axis REIT completed placement exercise which enlarged its share base. On yearly basis, 4QFY24 core net income was higher (+10.7%yoy), bringing FY24 net earnings higher at RM162.7m (+13.3%yoy). The earnings growth in FY24 was underpinned by rental contribution from Bukit Raja Distribution Centre 2 and newly acquired assets. Besides, earnings growth could also partly be attributed to positive rental reversion.

Nevertheless, earnings growth was partly offset by higher Islamic financing cost (+23%yoy) due to additional financing for acquisition of assets and increase in OPR by 25bps in May 2023.

Earnings forecast revised marginally upwards. We revise our FY25F/26F earnings forecast by +3.5%/+2.8% for housekeeping reason and include gross financing cost saving post completion of private placement. We also introduce our earnings forecast for FY27F. We see stable earnings prospect for Axis REIT as rental contribution from industrial assets is expected to remain stable. Demand for industrial space in Malaysia remains healthy and that underpins positive rental reversion of industrial assets.

Maintain BUY with a revised TP of RM2.02. We revise our TP for Axis REIT to RM2.02 from RM2.14 after taking into account of larger share base in our Dividend Discount Model (DDM) following completion of private placement. We maintain our BUY call on Axis REIT as earnings prospect will be driven by positive rental reversion on the back of healthy demand for industrial assets in Malaysia. Besides, its active asset acquisition will further drive earnings growth. Meanwhile, net distribution yield is estimated at 4.5%.

Source: MIDF Research - 24 Jan 2025