RHB Research maintains 'buy' call on Axis REIT

TheEdge Thu, Jan 21, 2021 12:15pm - 3 years View Original


KUALA LUMPUR (Jan 21): RHB Research has maintained its “buy” call on Axis Real Estate Investment Trust (REIT), with an unchanged earnings forecast and target price of RM2.30.

The brokerage firm said with five ongoing acquisitions and its RM135 million acquisition target value, Axis REIT remains on track for a stable earnings growth, and its below-average dividend yield is justified, given its Shariah-compliant status and strategic exposure to the industrial segment.

In a research note today, it said Axis REIT has room for acquisitions, given an ample debt headroom at 33% recorded in the financial year ended Dec 31, 2020 (FY20) before reaching the 60% gearing limit. 

With the five ongoing acquisitions and one completed on Jan 12, Axis REIT currently has 53 assets under its belt. 

“The downside risk to our call is the REIT’s exposure to the office segment, which may adversely impact its office properties’ occupancy and rental rates,” said RHB Research. 

It noted that Axis REIT’s blended occupancy remains stable at 91%, considering the single-tenanted nature of industrial assets that made up 92% of its portfolio.

“About 80% of leases up for expiry in FY20 have renewed at a +5.6% reversion, and warehouse and logistics assets contributed to the encouraging reversion rate,” said RHB Research. 

It said Axis REIT’s management has revealed that leases up for expiry in FY21 at 18% net lettable area have also shown encouraging renewals to date, and at a positive low single-digit reversion rate.

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