MIDF Research analyst Jessica Low Jze Tieng expects Axis-REIT to witness another strong performance in the financial year 2023 after ending FY22 on a positive note.
PETALING JAYA: Malaysian real estate investment trusts (REITs) that are highly exposed to the industrial or warehousing segment are deemed better positioned for earnings growth this year.
This is on the back of a solid demand for industrial properties, despite an expected slowdown in economic growth in 2023.
Analysts, however, have a mixed view on the overall outlook of the REIT sector, especially on trusts that have significant exposure in retail spaces and offices.
In a note, MIDF Research analyst Jessica Low Jze Tieng expects Axis-REIT to witness another strong performance in the financial year 2023 (FY23), after ending FY22 on a positive note.
“We make no changes to our earnings forecast for FY23. We remain positive on earnings outlook for Axis-REIT mainly due to positive rental reversion as demand for industrial space remains stable.
“Besides, earnings growth is also expected to be supported by asset acquisitions in the industrial space,” she said.
Low said Axis-REIT acquired four industrial properties in FY22, bringing its portfolio size to 62 properties.
MIDF Research has maintained its “buy” call on Axis-REIT, albeit with a lower target price of RM2.06, due to larger share base following the completion of its private placement on Jan 4.
“We remain positive on Axis-REIT due to its exposure to industrial assets,” said Low.
UOB Kay Hian Malaysia Research (UOBKH) also maintained its “buy” call on Axis-REIT.
“The majority of its tenants are in the manufacturing and logistics industries, comprising 30% and 42% of total net lettable area, respectively.
“Out of the 2.5 million sq ft of space leases that were due to expire in 2022, 77% has been renewed, with a positive rental reversion of 3.3%,” said UOBKH analyst Yap Xiu Li.
Yap noted that Axis-REIT currently offers an “attractive” dividend yield of 6% for 2023.
As for the retail-based IGB-REIT, which owns the Mid Valley Megamall and the Gardens Mall, Yap foresees a flattish earnings growth for 2023, even with the expected continuation of the REIT’s decent performance.
The flattish growth is expected on the back IGB-REIT’s rising operating expenditure.
Net property income (NPI) margin for 2022 improved to 76%. The NPI margins should normalise downwards towards pre-Covid-19 levels of 70% to 75%, as expenses are expected to increase. UOBKH has reiterated its “hold” call on IGB-REIT.
