船头船尾: Axis REIT - DPU Boosted By Special Dividend

Tuesday, April 22, 2014

Axis REIT - DPU Boosted By Special Dividend

Axis REIT’s 1Q14 results were in line, with earnings boosted by incremental contributions from some assets and a MYR1.61m one-off gain from Axis Plaza’s disposal. It announced a DPU of 5.30 sen, which includes a 0.80 sen special dividend from the disposal. We retain our earnings forecasts but lift our DDM-based FV to MYR3.23 (from MYR2.93), after revising our COE assumption. Maintain NEUTRAL.

In line. Axis REIT’s 1QFY14 core net profit of MYR22.3m (+8.5% y-o-y; +3.9% q-o-q) was in line with expectations. The REIT announced a distribution per unit (DPU) of 5.30 sen (+17.8% y-o-y), which includes a special DPU of 0.80 sen arising from the completion of the disposal of Axis Plaza on 25 March. Revenue growth continued to be driven by: i) positive rental reversion from its existing assets, and ii) a revision in car park rates for some assets in Aug 2013. Earnings for the quarter were also boosted by a MYR1.61m realised gain from the disposal of Axis Plaza. Note that Axis REIT also announced special dividends of 0.80 sen and 0.77 sen for 2QFY14 and 3QFY14, respectively. These will bring the total special dividend from Axis Plaza’s disposal to 2.37 sen.
Business updates. Axis REIT has yet to announce any new asset acquisitions. However, it recently said the Securities Commission (SC) has granted it an extension until 3 Oct 2014 for the placement of up to 86.0m new units. We believe that this could be an indicator of an impending acquisition, as Axis REIT’s placement exercises are typically carried out in tandem with the acquisition of new assets in order to minimise any potential earnings dilution. The REIT’s gearing currently stands at 0.32x, leaving it with a debt headroom of about MYR279.3m before reaching the SC’s gearing cap of 0.5x. The REIT’s overall operations remained healthy in 1QFY14, chalking up an overall portfolio occupancy of 93.2% and an average rental reversion of 8.9%.
Maintain NEUTRAL. We make no changes to our earnings forecasts. However, we revise upward our DDM-based FV to MYR3.23 (from MYR2.93), based on a new cost of equity (COE) of 7.5% (from 8.1%), as we believe that our previous COE assumption was too conservative. We reiterate our view that the acquisition of yield-accretive assets will be the stock’s potential re-rating catalyst.