Lower third-quarter rental income for Axis REIT

-A +A

Axis Real Estate Investment Trust
(Oct 21, RM3.68)
Maintain add with target price of RM3.61:
Axis REIT recorded a realised net profit of RM60.3 million for the first nine months ended September of financial year 2014 (9MFY14) and accounted for 58% of Affin’s estimate of RM104.3 million and 62.4% of consensus’ RM96.7 million.

The results were below our expectations due to slower completion of asset enhancement initiatives on Axis Business Park, while the Axis multi-tenanted buildings continued to see lower occupancy rates of 72.1% against the group average of 90.5% as at September this year.  We are reviewing our forecasts and recommendation pending a meeting with management.

Axis saw a 9MFY14 realised net profit of RM60.3 million (-4.3% year-on-year) and accounted for 58% of Affin’s estimate of RM104.3 million and 60% of consensus estimate of RM96.7 million.

Revenue for 9MFY14 was down 1.9% y-o-y to RM103.3 million due to a decline in rental income despite an 8% average rental reversion on 17.6% of  net lettable area renewed last year, mainly due to the loss of income after the sale of Axis Plaza.

For the third quarter (3Q) of FY14, Axis is proposing an interim dividend per unit (DPU) of five sen, bringing 9MFY14 DPU to 15.6 sen. This translates into an FY14 yield of 5.7%.

We are reviewing our “add” rating and our dividend discount model-derived target price of RM3.61 (7.67% cost of equity, 6% equity risk premium and 2.5% terminal growth rate). — Affin Hwang Capital, Oct 21


This article first appeared in The Edge Financial Daily, on October 23, 2014.