Affin Hwang maintains ‘buy’ on Axis REIT, pares TP to RM1.97

KUALA LUMPUR: Affin Hwang Capital research has kept its buy recommendation on Axis REIT on the back of moderate results in its most recent quarter.

It revised its 2020E and 2021E earnings forecasts by 1.1% higher and 4.1% lower respectively after incorporating the acquisitions of RM360mil of new assets, issuance of new shares in December, and deferment in the commencement of Axis Mega DC 2 to 2022.

The research house lowered the target price on the stock to RM1.97 from RM1.99 previously following the earnings changes.

“We continue to like Axis REIT for its industrial / warehouse asset portfolio and attractive 5.4% yield for 2020E,” it said.

In 4Q19, the REIT recorded a realised net profit of RM29.8mil, which was 0.3% higher year-on-year (y-o-y) and 6.3% improved from the immediate preceding quarter.

The quarter-on-quarter (q-o-q) improvement was owing to its profitability being affected by the recognition of RM493,000 of provisions for doubtful and bad debts, partly owing to Scomi Engineering vacating the Rawang facility in July 2019.

Axis’s earnings per unit however was lower q-o-q due to the dilution from the issuance of new shares in December 2019, resulting in a lower final quarter dividend per unit of 2.20 sen.

For the entire 2019, Axis’s realised net profit was 8.6% higher y-o-y at RM116.2mil owing to contributions from Nestle’s lease at Axis Mega DC and other newly acquired assets.

Source: TheStar