AXREIT (5106) - Axis REIT - Looking forward to 2015

AXREIT (5106) - Axis REIT - Looking forward to 2015

Target RM3.85 (Stock Rating: ADD)

Axis REIT's 4Q14 core net profit of RM21m brought its full-year FY14 core net profit to RM82.9m. This was below expectations as the results came in at 80% and 85% of our and consensus full-year forecasts, respectively. The main reason for the shortfall was the lower-than-expected topline as Axis REIT's acquisitions were only completed at the tail end of the year. Despite the weaker-than-expected results, we continue to be optimistic on Axis REIT's outlook given its aggressive acquisition drive to expand its asset portfolio. We make no changes to our FY15-16 earnings forecasts while introducing our FY17 numbers. Our Add call on the stock is maintained, with new acquisitions as potential catalysts for the stock.

DPU of 4.15 sen announced
Axis REIT announced a 4Q14 DPU of 4.15 sen, which brings its full-year FY14 DPU to 19.8 sen. This is below our expectation of a full-year DPU of 21 sen.

Results review
For the 4Q14, Axis REIT's revenues declined by 3.2% yoy to RM35m due to the disposal of Axis Plaza, which was completed in the 1Q14. 4Q14 net property income slid 4.2% as a result. For the full year of FY14, revenues fell 2.2% yoy and net property income 3.3% as the revenue lost from the Axis Plaza disposal was not replaced by any new assets given that the acquisitions were only completed by the tail end of Dec 2014. After stripping out revaluation gains and one-off gains on disposal for Axis Plaza, Axis REIT's core net profit stood at RM82.9m, a 1.4% yoy decline.

RM389m worth of acquisitions completed
In December 2014, Axis REIT completed acquisitions with a total value of RM389m, including the RM183m industrial property in Shah Alam and the RM153.5m Axis Steel Centre in Johor. We understand that 1Q15 will see the completion of another industrial building in Shah Alam, valued at RM45m. As in 2014, we expect Axis REIT to be on the look-out for more assets. Its CEO stated at the company’s recent EGM that it has allocated approximately RM300m-400m for asset acquisitions in 2015, which will further improve its longer-term outlook.

Source: CIMB Daybreak - 20 January 2015