Axis Real Estate Investment Trust (Axis REIT), which has a dominant position in the industrial/warehousing space, has continued to uphold its status as an investment safe haven for investors, showing persistently steady levels of incomes despite a difficult operating environment and paying attractive dividends.
Unlike REITs focusing on the hospitality, office and retail sectors that have been adversely impacted by the Covid-19 pandemic, Axis REIT’s realised income after taxation continues to grow during the period in review, rising 8.5% to RM124.9 million in the financial year ended Dec 31, 2020 (FY2020) from RM115.2 million in FY2019. It posted realised income after taxation of RM113.4 million and RM90.8 million in FY2018 and FY2017 respectively. This represented a compound annual growth rate of 11.2% over the three-year period — the highest among companies listed under the REIT sector of Bursa Malaysia.
Its net property income, likewise, saw steady increases, coming in at RM198.5 million in FY2020 — up from RM191.7 million, RM182.8 million and RM146.2 million in FY2019, FY2018 and FY2017 respectively.
Axis REIT has also provided consistent distributions to unitholders through growing its property portfolio. The REIT declared a total distribution per unit (DPU) of 8.75 sen for FY2020, which translated into a distribution yield of 4.3% based on the fund’s closing unit price of RM2.03 as at Dec 31, 2020. However, the DPU was 5.5% lower compared with FY2019’s DPU of 9.26 sen, owing to the enlarged units in circulation following its placement exercise completed in the fourth quarter of 2019. Axis REIT paid out DPU of 8.74 sen and 8.26 sen in FY2018 and FY2017.
Its stellar financial performance has also led to the REIT’s unit price rising from RM1.29 on March 31, 2018, to RM1.95 on March 31, 2021, reflecting a 51% return over three years. However, the unit price has fallen 10% year to date to close at RM1.88 on Dec 8. Nevertheless, it has outperformed the FBM KLCI, which has fallen 7% over the same period.
Consequently, Axis REIT achieved the highest total return to shareholders over three years for the period of March 30, 2018, to March 31, 2021 in the REIT category at 22.7%. This led Axis REIT to once again win this year’s The Edge Billion Ringgit Club (BRC) awards for highest growth in profit after tax over three years and highest returns to shareholders over three years in the REIT category.
When announcing its financial results for 3QFY2021 on Oct 21, Axis REIT Managers Bhd, the manager of Axis REIT, said it remains cautious of the current pandemic, which has caused a global economic downturn.
“While the pandemic’s impact on Axis REIT’s operations and financials has been manageable thus far, should the pandemic prolong or worsen unexpectedly, this may impact its performance for the rest of the financial year ending Dec 31, 2021,” it said, adding that the current gearing level of 37% provides headroom for Axis REIT to continue its yield-accretive acquisition strategy should good opportunities come along.
The REIT’s portfolio size stood at 57 properties valued at RM3.46 billion as at Sept 30, 2021, comprising 10.9 million sq ft of space and 152 tenants with an average occupancy rate of 94%.
Axis REIT Managers pointed to the REIT’s increasing focus on manufacturing and logistics warehouse facilities over the years, which has raised the proportion of single-tenanted properties in its portfolio. The proportion of single-tenanted properties rose to 75% as at Sept 30, 2021.
“These properties provide stable, long-term organic rental income growth, as their leases are typically long-term leases with pre-agreed rental step-ups. Single-tenanted properties also usually feature lower operating costs as maintenance costs are borne by tenants. Our single-tenanted properties are typically tenanted by multinational companies or government-linked companies that present a lower risk of default,” it added.
In a July 22 report, RHB Research says it likes Axis REIT for its key positioning as an industrial player that leverages on the e-commerce boom and its strong management team, which is experienced in aggressive acquisitions — allowing it to remain a key defensive play going forward. “Downside risk is the REIT’s exposure to the oversupply office segment, which may adversely impact its office properties’ occupancy and rental rates,” it notes.