Axis REIT’s FY16 results meet expectations
KUCHING: Axis Real Estate Investment Trust’s ( REIT) financial year 2016 (FY16) results has met analysts’ and consensus expectations.
In a filing on Bursa Malaysia, Axis REIT announced that for the financial year ended December 31, 2016, the REIT recorded a total revenue of RM167.36 million. Meanwhile, for the financial year under review, together with the brought forward undistributed income from previous quarter, the total income available for distribution amounted to RM91.12 million.
According to Affin Hwang Investment Bank Bhd (Affin Hwang), Axis REIT’s 2016 realised net profit of RM90.3 million was in-line with the research firm’s expectations and consensus.
Axis REIT FY16 core net income of RM92.4 million was also within the research arm of MIDF Amanah Investment Bank Bhd’s ( MIDF Research) expectations, meeting 100 per cent and 95 per cent of its and consensus full year estimates respectively.
Meanwhile, Axis REIT’s FY16 realised net income ( RNI) of RM90.2 million came in within both consensus and the research arm of Kenanga Investment Bank Bhd’s ( Kenanga Research) expectations at 97 per cent.
Distribution-wise, an interim dividend of 2.10 sen was declared (which includes a 0.15 sen nontaxable portion), bringing FY16 gross dividend per unit ( GDPU) to 8.25 sen which was also well within Kenanga Research’s expectations, making up 98 per cent of the research arm’s FY16E GDPU of 8.43 sen.
Affin Hwang highlighted that Axis REIT’s share price performance has lagged most of the other Malaysian REITs over the last 12 months.
The research firm noted that what stands out currently, is Axis REIT’s FY17-19E DPU yields of 5.8 to 6.6 per cent versus the sector at 5.7 to six per cent (excluding KLCC Property).
“On a more positive note, potential disposal of mature office assets and more sizeable acquisitions could be catalysts,” it said.
On the outlook, Kenanga Research noted that Axis REIT is finalising the completion of the acquisition for the REIT’s industrial facility located at Pasir Gudang, Johor ( RM33 million) and is likely to complete the disposal of Axis Eureka by the first quarter of 2017 (1Q17) which the research arm had previously accounted for in its estimates.
Meanwhile, development at Axis PDI phase 1 has already begun in December 2016 which the research arm expected to accrete positively to earnings in FY18.
All in, Kenanga Research maintained FY17E earnings of RM103.2 million for now, and look to introduce FY18E numbers pending further updates from the results briefing.
Kenanga Research also maintained ‘market perform’ and target price of RM1.58 per share on Axis REIT.
The reesearch arm’s target price was based on FY17E GDPU of 9.3 sen on 1.7 percentage point ( ppt) yield spread to its 10-year Malaysian Government Securities ( MGS) target of 4.2 per cent.
Kenanga Research ascribed a ‘ market perform’ call as the research arm saw no convincing near-term catalysts while most foreseeable downside risks have been accounted for.
“Additionally, Axis REIT lacks strong DPU accretive catalysts in the near term as recent acquisitions and disposals have mostly been neutral-to-mildly positive to DPU ( less than five per cent).
“More exciting catalysts for its DPU are needed to re-rate the stock,” the research arm said in a results note.
However, being highly institutionalized and one of the few Shariah- compliant MREITs, the research arm believed this will help to offer some downside risk protection.
As for MIDF Research, the research arm lowered its earnings forecast for FY17 marginally to reflect the loss of earnings from Axis Eureka. “Recall that Axis REIT proposed to dispose the asset in October 2016,” it said.
“FY17 core net income expected to be flattish due to loss of earnings from Axis Eureka.”