Axis REIT -
Share price: MYR3.40
Target price: MYR3.35 (unchanged)
Maintain HOLD. Axis REIT (AXRB)’s 9M13 core net profit of MYR63m (+7% YoY) was within our and market expectations. 3Q13 DPU of 4.7sen (+9.3% YoY, +2.2% QoQ) was also in line. We maintain our FY13-15 earnings forecasts and DCF-based TP of MYR3.35. AXRB currently trades at a net FY14 yield of 5.1%, slightly below the average yields of 5.2% for large-cap retail REITs.
Results were in line. Excluding revaluation gains of MYR14.6m, AXRB’s 3Q13 core net profit of MYR21.3m (+11% YoY, +0.5% QoQ) took 9M13 core earnings to MYR63.1m (+7% YoY), making up 70-71% of our and consensus full-year estimates. YoY growth was driven by full-year contributions from assets acquired in 2012 and positive rental reversions (+8.1% for renewed leases). This more than offset the decline in average occupancy (-0.94ppts QoQ) due to the closure of the Axis Business Campus for enhancement works. The trust declared a 3Q13 DPU of 4.7sen (99% payout; YTD: 13.8sen, +6% YoY); in line.
Reinvestment plan (IDRP) for 3Q13 DPU. Investors can elect to reinvest 2.2sen of the declared DPU of 4.7sen in new units, while the remaining 2.5sen will be paid in cash. The IDRP also provides unitholders with the option to reinvest the entire electable portion (2.2sen) or part of the electable portion (1.1sen in new units, 1.1sen will be paid in cash). If unitholders elect not to participate in the IDRP, the electable portion will be paid entirely in cash. The issue price of new units pertaining to the IDRP has been fixed at MYR3.20.
Awaiting new acquisitions. Negotiations for the injection of warehouses and office industrial buildings worth MYR317m are underway, we understand. The injections could add 1.1sen to our FY14 DPU forecast, assuming a cap rate of 8% and 93% equity funding (on placement proceeds of MYR293m). AXRB has proposed a placement of up to 90.8m new units (+20% to existing share capital; MYR293m in proceeds on a 5% discount to current prices) to fund these acquisitions.
Publish date: 22/10/13