Axis Real Estate Investment Trust (Axis REIT) proved its resilience among peers in face of disruptions from the Covid-19 pandemic and global economic headwinds yet again – bagging the same two The Edge-Billion Ringgit Club (BRC) awards in the REIT sector for a third consecutive year.
With its industrial-centric portfolio and tenant profile being less affected by movement restrictions than consumer-facing businesses, the REIT’s realised income after taxation grew during the period in review, rising 9% to RM136.2 million for the financial year ended Dec 31, 2021, from RM124.9 million in FY2020. Realised income after taxation was RM113 million and RM115.2 million in FY2018 and FY2019, respectively.
That brings the risk-weighted profit after tax growth over the three-year period between FY2018 and FY2021 to 6.3% — the highest growth in profit after tax over three years among peers in the REIT sector on Bursa Malaysia.
Its net property income had grown in tandem — registering RM182.8 million in FY2018, RM191.7 million in FY2019, RM198.5 million in FY2020 and RM212.9 million in FY2021.
Axis REIT declared a total distribution per unit (DPU) of 9.49 sen for FY2021, translating to a distribution yield of 4.89% based on the fund’s closing unit price of RM1.94 as at Dec 31, 2021. The REIT paid out DPUs of 8.74 and 9.26 sen in FY2018 and FY2019.
The dividends bolstered total returns to shareholders for the period of March 30, 2019 to March 31, 2022, in the REIT category to 7.9% — also the highest among peers, bagging Axis REIT the BRC award for highest returns to shareholders over three years for the sector.
For the six months ended June 30, 2022, Axis REIT recorded a total revenue of RM139 million. The realised net income generated from operations was RM82 million after deducting total expenditure of RM57.2 million, of which RM18.6 million was attributable to property expenses and RM38.6 million to non-property expenses.
In its filing with Bursa Malaysia, Axis REIT cautioned that an unexpected worsening of the Covid-19 pandemic may impact its operations and financials, which “have been manageable thus far for the rest of the financial year ending Dec 31, 2022.
“Positively, the current gearing level of 36% provides headroom for Axis REIT to continue its yield-accretive acquisition strategy should good opportunities come along,” it said.
Axis REIT also said it successfully secured renewed tenancies during FY2021 for 1.75 million sq ft of space. These efforts, along with new property acquisitions, “raised the fund’s portfolio occupancy to 96% and secured a 5.6% positive rental reversion across the portfolio”.
In a Sept 26 note, Hong Leong Investment Bank Research analyst Chan Jit Hoong was positive on Axis REIT for its “robust track record, increased popularity in industrial properties (93% of properties on industrial titles), high occupancy in its diversified portfolio and [being] one of the few Shariah-compliant REITs”.
It is worth noting that during the second quarter, Axis REIT completed the acquisition of DW1 Logistics Warehouse Johor, resulting in the property portfolio size of the REIT increasing from 60 to 61 properties as at June 30. More recently, the REIT proposed the acquisition of a RM41 million industrial facility comprising two warehouses and a three-storey annexed office building in Klang, Selangor.
Chan said Axis REIT’s portfolio was worth about RM4.1 billion and that the estimated acquisition price of the Klang property, at RM212 psf, is attractive and lower than the asking price of RM290 to RM350 psf for industrial properties in the area.
Axis REIT intends to utilise its existing credit facilities. Gearing ratio is expected to increase to 37% from 36% (1HFY2022), which is still well below the gearing limit of 60% (temporary increment [from] 50% until Dec 31, 2022) prescribed by the Securities Commission Malaysia. This provides Axis REIT ample headroom to undertake further acquisitions that are earnings accretive,” said Chan, who ascribed a “buy” call on the counter with a target price of RM2.08.
As at the third quarter, Axis REIT had 61 properties on its portfolio — 48 of which were fully occupied, one under development and another under major enhancement — with RM4.16 billion total assets under management.