Property | REITS
Shariah Compliant
- Keep BUY, new MYR2.23 TP from MYR2.08, 13% upside and 5% yield. Axis REIT’s 1H25 results were in line with expectations, supported by contributions from its FY24 acquisitions. We view Axis REIT as a defensive shelter for investors, underpinned by the stable outlook of the industrial property sector, a strong track record of inorganic growth, and a healthy gearing profile. With 46% of its debt on floating rates, we also see potential upside from interest cost savings following the recent rate cut. This report marks the transfer of coverage to Tai Yu Jie.
- Within expectations. 1H25 core profit of MYR101.9m was in line, meeting 50% of our and 49% of consensus full-year estimates. 2Q25 DPU amounted to 2.79 sen (2Q24: 2.25 sen) – which includes 0.14 sen from the disposal gain of The Annex – to be distributed over the next three quarters (total: 0.43 sen). This brings 1H25 DPU to 5.29 sen (1H24: 4.55 sen). Meanwhile, 2Q25 gearing stood at 32.7% (2Q24: 36.1%).
- Results review. YoY, 1H25 revenue rose 18.4% to MYR180.1m, driven primarily by contributions from the bulk of MYR719m acquisitions completed in 2H24, along with higher occupancy rates and positive rental reversions across existing assets. 1H25 net property income (NPI) margin expanded 1.3ppts YoY to 87.3%, reflecting operating leverage from stronger topline performance. QoQ, 2Q25 revenue and core profit were flattish, rising 0.4% and 2.7% due to the absence of new acquisitions during the quarter.
- Outlook. We expect 3Q25 revenue and earnings to remain flat QoQ due to the absence of new acquisition completions, while delivering strong YoY growth as the quarter will fully reflect contributions from assets acquired in FY24. Beyond the immediate term, we believe Axis REIT is poised for further inorganic growth, underpinned by a lower interest rate environment and a healthy gearing level of 33%, which offers financing headroom of up to MYR903m before reaching the 50% threshold. On the downside, we see limited impact from the recent sales and service tax (SST) expansion, as the REIT’s long-term master leases and strong tenant base – comprising mainly well-established MNCs – should be capable of absorbing incremental tax-related costs.
- Forecast and ratings. Post results, we maintain our forecasts. However, we raise our DDM-derived TP to MYR2.23 (including a 2% ESG premium) after updating our cost of equity (CoE) assumption (from 6.7% to 6.4%) to reflect a renewed beta assumption and lower risk-free rate following the recent rate cut. Our TP also implies a FY26F yield of 4.6%, which we think is fair, given the stable outlook for the REIT’s industrial assets – offering a spread of 120bps over the 10-year Malaysian Government Bond yield. Downside risks include non-renewal of the REIT’s expiring leases, lower-than-expected rental reversions, and cancellation of proposed acquisitions.
Forecasts and Valuation
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 288 | 320 | 362 | 371 | 378 |
| Net property income (MYRm) | 245 | 277 | 315 | 323 | 329 |
| Reported net profit (MYRm) | 145 | 166 | 205 | 211 | 217 |
| Total distributable income (MYRm) | 145 | 166 | 205 | 211 | 217 |
| DPS (MYR) | 0.09 | 0.09 | 0.10 | 0.10 | 0.11 |
| DPS growth (%) | (7.2) | 4.8 | 8.4 | 2.9 | 2.0 |
| P/B (x) | 1.14 | 1.04 | 1.05 | 1.06 | 1.06 |
| Dividend Yield (%) | 4.5 | 4.7 | 5.1 | 5.3 | 5.4 |
| Return on average equity (%) | 5.4 | 5.4 | 5.8 | 5.6 | 5.7 |
| Return on average assets (%) | 3.3 | 3.4 | 3.7 | 3.7 | 3.7 |
Overall ESG Score: 3.1 (out of 4)
E Score: 3.0 (GOOD)
S Score: 3.0 (GOOD)
G Score: 3.3 (EXCELLENT)
Please refer to the ESG analysis on the next page
Emissions And ESG
Trend analysis
In 2024, Axis REIT reduced its total energy consumption by 15.6%, achieved a 20% reduction in building energy intensity, and cut GHG emissions by 14% compared to the baseline set in 2019.
| Emissions (tCO2e) | Dec-22 | Dec-23 | Dec-24 | Dec-25 |
|---|---|---|---|---|
| Scope 1 | 3 | 29 | 30 | – |
| Scope 2 | 3,141 | 2,929 | 2,867 | – |
| Scope 3 | – | 211 | 182 | – |
| Total emissions | 3,144 | 3,169 | 3,079 | na |
Latest ESG-Related Developments
- Obtained green building certifications for six buildings as at Dec 2024.
- Began reporting scope 3 GHG emissions, as well as emissions from company vehicles as part of scope 1 starting with FY23.
- Efficient energy management via initiatives such as installing efficient lighting, solar panels, and upgrading air-conditioning systems.
- Negotiated three new green leases in 2024 for Axis Mega Distribution Centre Phase 2.
ESG Unbundled
Overall ESG Score: 3.1 (out of 4)
Last Updated: 23 April 2025
E Score: 3.0 (GOOD)
Axis REIT sources energy saving products and renewable energy components for new developments and AEIs. Electricity consumption and GHG emissions reduced by 0.16% in FY21, while emphasis is placed on the continuation of waste reduction and green initiatives.
S Score: 3.0 (GOOD)
There have been 926 beneficiaries from community engagement initiatives in FY19. Key CSR programmes include the provision of space for blood donation drives, as well as donations to the Fire & Rescue Department and SMK(P) Pudu Building Fund – benefitting 619 students.
G Score: 3.3 (EXCELLENT)
The Board engaged a third-party consultant to facilitate the independent assessment of the Board. The Board has also put in place an anti-corruption framework for the Manager. Axis REIT has 30% women directors on the Board.
ESG Rating History
[Chart showing ESG rating history from Jul-23 to Jul-25. The rating remained consistently at 3.1 throughout the period.]
Financial Exhibits
Key drivers
i. Growing demand for industrial properties due to e-commerce growth.
Key risks
i. Non-renewal of its expiring leases;
ii. Lower-than-expected rental reversions;
iii. Cancellation of proposed acquisitions.
Company Profile
Axis REIT is a diversified REIT, specialising in commercial and industrial properties.
Valuation basis
Dividend discount model
Financial summary
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring EPS (MYR) | 0.09 | 0.09 | 0.10 | 0.10 | 0.11 |
| EPS (MYR) | 0.09 | 0.10 | 0.10 | 0.10 | 0.11 |
| DPS (MYR) | 0.09 | 0.09 | 0.10 | 0.10 | 0.11 |
| BVPS (MYR) | 1.72 | 1.89 | 1.88 | 1.87 | 1.86 |
| Return on average equity (%) | 5.4 | 5.4 | 5.8 | 5.6 | 5.7 |
| Weighted avg adjusted shares (m) | 1,641.05 | 1,742.03 | 2,018.53 | 2,028.63 | 2,038.77 |
Valuation metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 22.10 | 21.08 | 19.44 | 18.90 | 18.52 |
| P/E (x) | 22.22 | 20.70 | 19.44 | 18.90 | 18.52 |
| P/B (x) | 1.1 | 1.0 | 1.1 | 1.1 | 1.1 |
| FCF Yield (%) | 0.7 | 0.8 | 5.6 | 5.7 | 5.8 |
| Dividend Yield (%) | 4.5 | 4.7 | 5.1 | 5.3 | 5.4 |
| EV/EBITDA (x) | 1.40 | (0.22) | 0.03 | 0.10 | 0.16 |
| EV/EBIT (x) | 1.40 | (0.22) | 0.03 | 0.10 | 0.16 |
Income statement (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover | 288 | 320 | 362 | 371 | 378 |
| EBITDA | 208 | 241 | 274 | 281 | 287 |
| Operating profit | 208 | 241 | 274 | 281 | 287 |
| Net interest | (59) | (73) | (70) | (70) | (70) |
| Pre-tax profit | 149 | 168 | 205 | 211 | 217 |
| Taxation | (4) | (3) | 0 | 0 | 0 |
| Recurring net profit | 146 | 163 | 205 | 211 | 217 |
Results At a Glance
Figure 1: Axis REIT’s results summary
| FYE Dec (MYRm) | 2Q24 | 1Q25 | 2Q25 | QoQ (%) | YoY (%) | 1H24 | 1H25 | YoY (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 76.5 | 89.9 | 90.3 | 0.4 | 17.9 | 152.1 | 180.1 | 18.4 | Higher property income from the commencement of four new leases |
| Net property income (NPI) | 66.0 | 78.2 | 79.1 | 1.1 | 19.9 | 130.9 | 157.3 | 20.2 | |
| Net financing expense | (17.4) | (17.8) | (17.7) | (0.1) | 1.7 | (33.4) | (35.5) | 6.2 | Higher financing costs due to additional financing utilised to complete new acquisitions |
| EI | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm | |
| Others | (8.2) | (7.6) | 9.8 | (229.9) | (219.2) | (16.7) | 2.3 | (113.5) | |
| Pretax profit | 38.9 | 51.4 | 67.2 | 30.7 | 72.5 | 81.2 | 118.6 | 46.0 | |
| Net profit | 38.9 | 51.4 | 67.2 | 30.7 | 72.5 | 81.2 | 118.6 | 46.0 | |
| Core net profit | 39.4 | 50.3 | 51.6 | 2.7 | 31.1 | 79.3 | 101.9 | 28.5 | In line with expectations |
| Earnings per unit (sen) | 2.26 | 2.50 | 2.65 | 6.0 | 17.3 | 4.55 | 5.15 | 13.2 | |
| Dividend per unit (sen) | 2.25 | 2.50 | 2.79 | 11.6 | 24.0 | 4.55 | 5.29 | 13.2 | Includes 0.14 sen from the disposal gain of The Annex, to be distributed over next three quarters (total: 0.43 sen) |
| NPI margin (%) | 86.2 | 87.1 | 87.6 | 86.1 | 87.3 | ||||
| Pretax margin (%) | 50.9 | 57.2 | 74.4 | 53.4 | 65.8 | ||||
| Net margin (%) | 51.4 | 55.9 | 57.2 | 52.1 | 56.6 |
Recommendation Chart
Price Chart
[Chart showing recommendation history vs. price from Jul-20 to Jan-25. The price fluctuates between approx 1.7 and 2.1. The recommendations are mostly ‘Buy’.]
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-04-24 | Buy | 2.08 | 1.87 |
| 2025-01-24 | Buy | 2.08 | 1.76 |
| 2024-10-29 | Buy | 2.08 | 1.80 |
| 2024-08-29 | Buy | 2.11 | 1.80 |
| 2024-07-24 | Buy | 2.09 | 1.85 |
| 2024-05-24 | Buy | 2.09 | 1.87 |
| 2024-04-25 | Buy | 2.08 | 1.90 |
| 2024-04-24 | Buy | 2.11 | 1.87 |
| 2024-04-23 | Buy | 2.11 | 1.86 |
| 2024-01-24 | Buy | 2.04 | 1.78 |
| 2023-10-29 | Buy | 2.04 | 1.80 |
| 2023-10-26 | Buy | 2.08 | 1.79 |
| 2023-07-27 | Buy | 2.08 | 1.81 |
| 2023-04-19 | Buy | 2.14 | 1.91 |
| 2023-01-20 | Buy | 2.14 | 1.89 |
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments.
DISCLOSURE OF CONFLICTS OF INTEREST
RHB Investment Bank Berhad, its subsidiaries (including its regional offices) and associated companies, (“RHBIB Group”) form a diversified financial group, undertaking various investment banking activities which include, amongst others, underwriting, securities trading, market making and corporate finance advisory. While the RHBIB Group will ensure that there are sufficient information barriers and internal controls in place where necessary, to prevent/manage any conflicts of interest to ensure the independence of this report, investors should also be aware that such conflict of interest may exist in view of the investment banking activities undertaken by the RHBIB Group as mentioned above and should exercise their own judgement before making any investment decisions.
Analyst Certification
The analyst(s) who prepared this report, and their associates hereby, certify that: (1) they do not have any financial interest in the securities or other capital market products of the subject companies mentioned in this report, except for:
| Analyst | Company |
|---|---|
(2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
