Axis Reit’s 9M22 core net profit was within Analyst consensus’ FY22E. A 3rd interim gross DPU of 2.45sen was declared (9M22: 7.42sen).
"No changes to our earnings forecasts. We also maintain our BUY rating (sector’s top pick) and DDM-TP of MYR2.12 (Ke: 6.9%). We continue to favour Axis’ active acquisition strategy, namely for industrial properties. Current FY22-24E net DPU yields are 5%-5.6%," says Maybank.
New assets lifted earnings
3Q22 core net profit was MYR39.6m (+12% YoY, -6% QoQ), bringing 9M22 core earnings to MYR120.5m (+18% YoY), at 71%/70% of our/consensus’ FY22 estimates.
YoY, 3Q22’s bottom-line continued to be supported by; (i) new assets, having acquired 4 properties since end-3Q21, (ii) positive rental reversion, and (iii) sale of recycled materials arising from demolition work at Bukit Raja Distribution Centre 2 (BRDC2).
QoQ earnings however, was offset by; (i) higher property expenses (+6.3%) - namely maintenance cost, and (ii) higher financing costs (+14.4%) from increased borrowings.
Notably, Axis’ portfolio occupancy eased by -1ppt to 95% (2Q22: 96%), as Axis Facility 2 @ Bukit Raja is undergoing major enhancement since Aug 2022 (expect to be ready by end-Jan 2023).
Maybanks says it maintains the FY22-24E earnings and assumptions, where near term growth are mainly driven by new assets, stable portfolio occupancy and some positive rental reversions. Axis’ gross gearing was a decent 0.36x (end-3Q22), which supports more asset purchases.
"We believe earnings outlook for Axis remains resilient, contributed by recent completed asset acquisitions and on-going acquisition of assets.
"Our FY23 earnings growth forecast is also driven by rental income contribution from Shopee Express @ Bukit Raja Distribution Centre 2 from 3Q23 onwards (5% of Axis’ FY23E revenue; lease commencing no later than 1 Sept 2023).
"At the same time, there is also on-going plans to develop Axis Mega DC phase 2, which Axis expects to commence construction earliest by end-2022," it says.