11 Things You Must Know About Axis REIT

Axis REIT was listed on Bursa Malaysia on 3 August 2005 as Malaysia’s first business space and industrial REIT. Subsequently, on 11 December 2008, the REIT was reclassified into an Islamic REIT. As at 15 February 2018, the REIT is worth RM 1.69 billion in market capitalization. Here, I’ll list down 10 quick things you need to know about Axis REIT before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: AXREIT / KLSE: 5106
Market Capitalization: RM 1.69 billion (15 February 2018)

Share Price: RM 1.37 (15 February 2018)

Industry: Reit

Syariah Compliant: Yes

#2: What’s an Islamic REIT?  

For a start, an Islamic REIT is one where its rental income derived from non permissive activities must not exceed the 20% benchmark set by the Syariah Advisory Council of the Securities Commission of Malaysia. These activities include the provision of financial & insurance services, gaming, hotels & resorts, and manufacturing of non-halal products. This reclassification enables Axis REIT to widen its investor base to include local Syariah funds.

In 2016, Axis REIT has reported that only 2.5% of its income was generated from non permissive activities, thus, fulfilling the benchmark set above.

#3: Track Record of Growth

Since its listing, Axis REIT has embarked on an aggressive expansion plan to grow its portfolio. In 2005, it had 5 properties valued at RM 296.0 million. By 2017, Axis REIT has a portfolio of 40 properties valued at RM 2.48 billion.

Source: Annual Reports of Axis REIT

Source: Annual Reports of Axis REIT

#4: The Financials

As a result, Axis REIT has achieved growth in revenue, net property income, and realized earnings:

  1. Revenue has increased by 322%, up from RM 40.9 million in 2006 to RM 172.7 million in 2017.  
  2. Net property income has increased by 341%, up from RM 33.1 million in 2006 to RM 146.2 million in 2017.
  3. Realized earnings have increased by 244%, up from RM 26.4 million in 2006 to RM 90.8 million in 2017.

In 2014, Axis REIT has implemented a 2 for 1 unit split. Hence, I’ve adjusted its distributions per unit (DPU) based on its enlarged number of units. I have discovered that Axis REIT has maintained its DPU at 8.0 – 10.0 sen since the year 2010.

Source: Annual Reports of Axis REIT

Source: Annual Reports of Axis REIT

#5: Lease Profile:

As at 31 December 2017, Axis REIT has achieved an occupancy rate of 91.1% for its overall portfolio. It has reported a weighted average lease expiry period of 5.87 years. From its portfolio of 40 properties,

  1. 28 properties are enjoying 100% occupancy rate.
  2. 5 properties are enjoying 80% – 90% occupancy rate.
  3. 5 properties are enjoying 80% occupancy rate.
  4. 1 property has just completed its development. (Note 6)
  5. 1 property is undergoing its development. (Note 6)

#6: Property Development

Axis REIT has completed two development projects. They are:

  1. Nestle DC @ Axis Mega Distribution Centre
    This property has a net lettable area (NLA) of 515,000 sq. ft and is valued at RM 261 million. It is handing over to its tenant with lease commencing on 1 June 2018 for over a 10-year period where its rent rates start at RM 19.2 million a year.
  2. Upeca Facility @ Malaysia International Aerospace Centre Technology Park, Subang
    Axis REIT has spent RM 19.9 million to lease 7.02 acres of land from Malaysia Airlines Holdings Bhd (MAHB). On the piece of land, Axis REIT would develop a manufacturing facility based on specifications given by Upeca. The development cost for this project is estimated to be RM 46.8 million. Upon completion, Axis REIT leases the property to Upeca for 20 years at starting rent of RM 5.6 million a year.

#7: Major Acquisitions

Axis REIT has completed the following acquisitions:

  1. Wasco Facility – Gebeng, Pahang
    This property is purchased for RM 155 million and is now leased to a single tenant: Wasco Coatings Malaysia Sdn Bhd for a fixed period of 15 years at starting rent of RM 11.7 million a year.

In addition, it has several ongoing property acquisitions:

  1. 4 Factories in Indahpura, Johor
    On 11 November 2015, Axis REIT has announced the proposal to buy 4 single-story industrial factories at Kawasan Perindustrian i-Park at Indahpura, Johor for RM 61 million. The property is currently leased to Beyonics Technology (Senai) Sdn Bhd for a fixed term of 10 years starting from 1 August 2015.

    On 28 January 2016, the acquisition of one of the 4 factories has been completed for RM 14.2 million. The purchases of the other 3 factories are still ongoing and are targeted to be completed in 1H 2018.
  2. Warehouse Facility in Shah Alam, Selangor
    Axis REIT is acquiring this property for RM 87 million and targets to complete this acquisition by 2H 2018.
  3. Manufacturing Facility in Senawang, Negeri Sembilan
    Axis REIT is acquiring this property for RM 18.5 million and targets to complete this acquisition by 2H 2018.

#8: Debt Profile

As at 31 December 2017, Axis REIT has reported having RM 842.6 million in long-term financing, 33.1% of its total assets. Presently, 37% of its financing is based on fixed rate. The effective profit rate incurred by Axis REIT is 4.21%.

#9: Valuation

As I write, Axis REIT is trading at RM 1.37 a unit.

As at 31 December 2017, Axis REIT has reported having RM 1.28 in net asset value a unit. Thus, its current P/NAV works out to be 1.07.

Axis REIT adopts a distribution policy to declare and pays out at least 90% of its distributable income on a quarterly basis. Over the last 12 months, Axis REIT has paid out 8.26 sen in DPU.

If Axis REIT is able to maintain its DPU at 8.26 sen for the next 12 months, its gross dividend yield is expected to be 6.03%. For individual investors, it is prudent to deduct 10% withholding tax from 7.43 sen when calculating your net dividend yield, as such, I would expect net dividend yield to be 5.43%.

#10: Investors Relation

For further enquiries or to request for additional investment information on Axis REIT’s Investors Relation matters, you may contact:

Ms. Chan Tze Wee
Manager, Investments & Investor Relations

Office : +603 7958 4882 (ext. 8008)

E-mail: info@axis-reit.com.my

#11: Major Shareholders

The substantial shareholders of Axis REIT with their latest shareholdings as at 31 December 2017 are as followed:

– Employees Provident Fund Board: 10.23%

– Amanah Saham Bumiputera: 8.11%

– Kumpulan Wang Persaraan (Diperbadankan): 8.01%

– Lembaga Tabung Haji: 4.87%

– Tew Peng Hwee @ Teoh Peng Hwee: 4.53%

– Alex Lee Lao: 4.17%

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