AllianceDBS maintains hold on Axis REIT

PETALING JAYA: AllianceDBS Research has maintained its "hold" call on Axis Real Estate Investment Trust (Axis REIT) with a target price of RM3.60 despite further plans for asset injection, as the near term distribution per unit (DPU) growth prospect is unexciting amid subdued leasing and rental reversion outlook for office space.
"We are largely maintaining our earnings at this juncture, with only slight adjustments made for the present occupancy levels; as well as imputing adjustments for management fees that will be paid in units. Management guidance is that roughly two months of fees per year will be paid in units," it said in its research note yesterday.
According to AllianceDBS, Axis REIT intends to continue its commendable asset growth via acquisitions, and disclosed three prospective assets worth RM160 million (industrial and warehouse) located on mainland Penang.
The RM160 million presents a potential boost of 7% to 8% to the REIT's current asset size.
"We note that one of the assets, a RM38 million industrial facility in Prai, had been revealed earlier and is currently undergoing due diligence. We were informed that the other two assets are still in preliminary stages of talks and inspections," it said.
Axis REIT Managers Bhd CEO Datuk Stewart LaBrooy also indicated an annual asset acquisition target of RM300 million to RM400 million, with a grander goal of RM3 billion assets under management (AUM) in three years from the current RM2 billion.
"An encouraging signal was portfolio occupancy rising to 93% by end-FY14 from 90.5% the quarter before. Although the rebound was mainly due to the effect of newly acquired assets (all 100% taken up), we note replenished occupancies at the Annex.
"Furthermore, management expects the refilling of space at the refurbished Axis Business Campus and Axis Business Park (block C) from around second quarter of 2015 onwards," said the research house.