Stocks to Watch Axis REIT, Chin Well, Bumi Armada, CIMB, Hartalega

KUALA LUMPUR (April 16): Malaysia's stock market benchmark could take the cue from external factors on Tuesday as global economic headwinds take centre stage in a still-fragile macro landscape.

Analysts said dynamics across the US, China and European countries will be closely watched as investors assess the impact from these major importing nations on world financial markets.

In Malaysia, it will be interesting to see whether domestic funds could offer adequate support to the FBM KLCI against a still-volatile global backdrop which have thrown most Asian indices into the red.

The FBM KLCI of 30 stocks fell 5.61 points to close at 1,597.51 on Monday.

Stocks to watch on Tuesday include Axis Real Estate Investment Trust (Axis REIT), Bumi Armada Bhd, CHIN WELL HOLDINGS BHD [], CIMB Group Holdings Bhd, and HARTALEGA HOLDINGS BHD [].

Axis REIT's first quarter net profit rose 27% from a year earlier, as a higher top line and a revaluation surplus mitigated the impact of higher expenses. In a statement to the exchange on Monday, Axis REIT said its net profit came to RM20.96 million in the quarter ended March 31, 2012 versus RM16.49 million previously while revenue was up 18% to RM32.29 million from RM27.25 million.

Bumi Armada will offer oil and gas support services to Russia-based OAO Lukoil in a deal worth an estimated U$200 million (RM614 million). In a statement to Bursa Malaysia on Monday, Bumi Armada said the job includes engineering, procurement, installation and pre-commissioning of subsea in-field and inter-field pipelines for the Filanovsky field in the Caspian Sea.

Chin Well, a screw and bolt manufacturer, plans to pay a tax-exempt interim dividend of 2% for the financial year ending June 30, 2012.

Reuters reported that CIMB will enter into an agreement to acquire a controlling 60% stake in the Philippines-based conglomerate San Miguel Corp's unlisted banking arm "soon", quoting a senior board member. The deal will allow San Miguel — the Philippines's most diverse conglomerate — to keep a minority stake in the unlisted bank while focusing on its new ventures such as power, mining, telecoms, infrastructure, and more recently, airlines.

RHB Research Institute Sdn Bhd has slashed its net profit forecast for Hartalega, a nitrile glove manufacturer, by between 6.1% and 18.5% for financial years 2012 till 2014. The research house said it has taken into account the glove manufacturer's lower capacity utilisation, and average selling prices apart for costlier raw material and higher net interest expenses.



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Axis REIT 1Q profit up 27% year-on-year

KUALA LUMPUR (April 16) : Axis Real Estate Investment Trust’s (Axis REIT) first quarter net profit rose 27% from a year earlier, as a higher top line, and a revaluation surplus mitigated the impact of higher expenses.

In a statement to the exchange on Monday, Axis REIT said its net profit came to RM20.96 million in the quarter ended March 31, 2012 versus RM16.49 million previously while revenue was up 18% to RM32.29 million from RM27.25 million.

Axis REIT said revenue was helped by income from two PROPERTIES [] acquired by the company during the quarter. The trust had also registered a property revaluation surplus of RM300,000 during the period, it said.

The property trust said it plans to reward shareholders with a first interim income distribution of 4.3 sen a unit, of which, a 4.25 sen portion is taxable while the 0.05 sen balance is tax-exempted.



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Stocks to Watch Axis REIT, K-One Tech, IOI, Tan Chong, TNB

KUALA LUMPUR (April 12): Malaysian stocks could take the cue from China's first quarter gross domestic product (GDP) numbers, and the US corporate earnings dynamics on Friday.

Against the backdrop of external uncertainties, analysts cautioned that the FBM KLCI could see limited gains in the absence of domestic catalysts. The FBM KLCI rose 4.1 points to close at 1,601.27 on Thursday.

Stocks to watch on Friday include Axis Real Estate Investment Trust, K-ONE TECHNOLOGY [] BHD [], IOI Corp Bhd, TAN CHONG MOTOR HOLDINGS BHD [], and TENAGA NASIONAL BHD [] (TNB).

Axis REIT plans to acquire land within Negeri Sembilan's Nilai Industrial Area for RM26.5 million. The leasehold sites will be acquired from LRS Property Sdn Bhd, according to the acquirer.

K-One Tech, an electronic systems manufacturer, said one of its three factories in Ipoh was gutted by fire on Tuesday afternoon. The damaged is estimated at RM13 million, it said.

IOI's 30.4% associate Bumitama Agri Ltd rose as much as 36% on the PLANTATION [] firm's debut on the Singapore bourse on Thursday. Bumitama shares added 27 Singapore cents to an intraday high of S$1.02 (RM2.49) before closing lower at 98 Singapore cents.

CIMB Investment Bank has raised its fair value for Tan Chong from RM4.60 to RM4.75 with a "Neutral" recommendation.

TNB's second quarter net profit rose more than four fold from a year earlier, as a RM2.02 billion fuel-cost compensation from the government and Petroliam Nasional Bhd (Petronas) mitigated the impact of costlier fuel to the state-owned utility's profits.

TNB said its bottom line was also helped by higher electricity sales and foreign exchange translation gains. It said net profit came in at RM2.82 billion in the second quarter ended Feb 29, 2012 against RM641.1 million a year earlier as revenue grew 17% to RM8.63 billion from RM7.37 billion.



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Axis REIT buys industrial building facility in Nilai for RM26.5m

KUALA LUMPUR (April 12): Axis Real Estate Investment Trust Bhd's manager Axix REIT Managers Bhd (ARMB) is acquiring an industrial building facility in Nilai for a total lump sum of RM26.5 million.

In statement on Thursday, ARMB said it had entered into a proposed acquisition of the building facility — Emerson Industrial Facility Nilai, which had a a gross built up of approximately 192,677 sq ft, located on two parcels of adjoining industrial land at the Nilai Industrial Area 1 — with LRS Property Sdn Bhd (LRS).

It said the the first parcel of industrial land (first land) was an industrial facility with a single storey detached factory, an annexed three storey office building, a double storey canteen/storage annexe with ancilliary buildings with a land area of 144,890.2 sq ft.

The second parcel of the industrial land (second land) has a single storey warehouse building with a three storey office, and ancillary buildings with a land area of 171,973.1 sq ft, it said.

It said both parcels of the land came with a 99 year leasehold title which would expire in September, 2095 and was presently tenanted by Emerson Process Management Manufacturing (M) Sdn Bhd ("Emerson"), and K-Plastics Industry Sdn Bhd.

"Emerson is a diversified global manufacturing and TECHNOLOGY [] company with annual sales of US$24 billion (RM73.68 billion).

"Recognised widely for their engineering capabilities and management excellence, Emerson has approximately 133,000 employees and 235 manufacturing locations worldwide," it said.

AMRB said Emerson Process Management Manufacturing (Malaysia) operated a world-class valve manufacturing plant in Nilai.

"This plant manufactures and assembles a wide variety of Fisher valve products, including globe valves, butterfly valves, angle valves, V-ball valves, and actuators for both the Malaysian and export markets.

"The plant is now Emerson's largest valve manufacturing facility in Asia by shipment volume," it said.

AMRB said Emerson's tenancy agreement for the First Land and part of the buildings built on the Second Land was for a term of three years expiring in stages on May 31, 2013 and June 30, 2013, with an option to renew for another period of three (3) years.

Emerson had on Feb 10, 2012 exercised the Option for Renewal, it said.

AMRB said the remainder of the space on the Second Land was rented to K-Plastics Industries Sdn Bhd for a term of two years expiring on 14 July 2012 with an option to renew for a period of one year.

K-Plastics are manufacturers of plastic and packaging products.

"The acquisition is accretive and will provide the Trust with a combined gross income of RM 2.65 million annually and this translates to a net yield before financing cost of 9%.," it said.



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Way of the dragon

In the Q&A below, HwangDBS Vickers Research explains the significance and expectations of the Year of the Dragon, which will reign from Jan 23, 2012 through Feb 9, 2013.

Q: Can you briefly explain the Chinese animal signs and basics of Chinese geomancy?
A: According to the Chinese almanac, the lunar calendar runs on a 60-year cycle, rotating among 12 animal signs of the zodiac and five elements that represent the basic components of everything in the universe — fire, earth, metal, water and wood, in this order — with their inter-relationships governed by the cycle of birth and destruction. This year, we are marking the Year of the Water Dragon, which takes over from the Metal Rabbit.

How do you know about celestial predictions when you are supposed to be a financial analyst? Who are your sources?
We do not pretend to know everything, certainly not the art of fortune telling. We trawl through cyberspace and borrow the crystal balls of experts who use a combination of astrology, horoscope and metaphysics principles. Based on consensus opinion, we then link their interpretations to our stock market knowledge, with a dose of logic of course.

Are the astrologers’ forecasts reliable?
Call them what you want — geomancers, soothsayers, astrologers, fortune tellers, feng shui practitioners — these self-styled masters earn a living by making predictions. Just like us, who advise clients by recommending what stocks to buy or sell (and hope we will be rewarded with commissions in return). Since forecasting is more art than science, based on different methods and subjective interpretations, there is no guarantee of accuracy. So, please do not hold us liable for their forward-looking opinions.



But were the predictions accurate last year?
To be honest, it was mixed. We wrote that the stock market rally would extend into 2011, but our local bourse could not sustain its momentum despite registering new highs. Yet, the advice to be more vigilant in the later stages due to possible cooling effects arising from the water element with the arrival of the Year of the Dragon seemed to offer a sense of truth.

In hindsight, investors who emulated the traits of the Rabbit would have benefited. Calls to use the long bunny ears to filter out market noises, avoid overconfidence, and show resilience, were timely. A word of caution — past track record is not a guarantee or reflection of future performance.

Why should we then read this report?
This report is for fun, if you will. The content is merely for amusement to take your mind off the shaky global economic outlook. It is not meant to be a substitute for our fundamental approach. So, be open-minded and stay positive. You can choose to believe or ignore these general forecasts, which are made without considering specific elements. Whatever the omens, remember, you are the master of your own destiny. So, let’s use our common sense to seek the truth.

Which elements will dominate in the Year of the Dragon?
We will see water sitting on top of earth. This represents a destructive cycle as earth is the destroyer of water according to the cycle of birth and destruction. Due to this conflicting relationship, there could be upheavals arising from a sense of imbalance. The combination of the water and earth elements may also result in murky waters, which could obscure the outlook. In addition, the Dragon is the only animal in the Chinese zodiac that is mythical, which implies events may unfold in an illusory manner. Yet, the later part of the year promises stability and recovery.

Will the world end on Dec 21?
As an investor, you should worry more about whether you will make money this year. Contrary to popular belief, the Mayan doomsday prophecy did not predict that the world would end on Dec 21, 2012. It merely said the date marks the end of a great cycle and the beginning of another in their calendar. It is also a leap year, which signifies that we will be able to jump over obstacles ahead. And just to be clear, we plan to be around this time next year to write on the Year of the Snake.

What happened in previous Dragon years?
An analysis of historical stock market performance was inconclusive. In Malaysia, the benchmark KLCI saw an obvious downtrend in 2000, but chalked up gains in 1988. If we go back to the last Year of the Water Dragon in 1952, the DJIA on Wall Street pulled back first (-7%) before rebounding subsequently to close the year up a minute 4%.

When will the bulls return? What does the Year of the Dragon hold for our stock market?
We wish we knew the exact timing. According to the soothsayers, the bulls may not make their presence felt this lunar year. This is because of the missing fire element, which represents the driving force behind the stock market. You may argue that the mythical creature could breathe out fire, but let’s not forget the dominance of the water element in the Year of the Dragon that can calm its fire. Also, because the spirit of the Dragon tends to make everything seem larger than life, the financial markets could see more volatility this year.

To prosper, be adaptable like the Dragon, which can live in water, on land and in the air. Being imaginative and self-driven are essential investment traits, too, as the divine beast is always able to see and chart new paths.


Which sectors will see good fortune?
Industries associated with the wood and earth elements. This is because according to the cycle of birth and destruction, wood conquers earth while earth conquers water (and earth and water are the two dominant elements in the Year of the Dragon). They include consumer products, food and beverage and media (wood element), and property, construction, petroleum related and mining (earth element). Meanwhile, industries that fall under the fire element (airlines, for example) and water element (shipping) are expected to face turbulent times.

Where should investors put their money? And why?
In defensive stocks, of course. For prudence’s sake, that’s why. If the worst is yet to come, then it only makes sense to adopt a capital preservation investment strategy. To seek shelter in Malaysia, consider the following eight names. They are either in auspicious sectors or offer attractive dividend returns: Berjaya Sports Toto Bhd (“buy”, target price: RM4.70), Parkson Holdings Bhd (“buy”, TP: RM6.55), KLCC Property Holdings Bhd (“buy” TP: RM3.70), Axis REIT (“buy”, TP: RM2.75), Gamuda Bhd (“buy”, TP: RM4.80), Petronas Gas Bhd (“buy”, TP: RM16.90), Bumi Armada Bhd (“buy” TP” RM5) and Malayan Banking Bhd (“buy” TP: RM10.60).



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More asset acquisitions for Axis REIT in the pipeline

Axis REIT (Jan 18, RM2.73)
Maintain market perform with fair value RM2.72 from RM2.70: Axis REIT is currently looking at 11 potential assets totalling RM545 million that could be injected into the REIT over the next two years. The real estate investment trust plans to acquire half of these assets by end-2012. These assets include the two proposed acquisitions in Penang announced in 4QFY11.

The Bayan Lepas acquisition was completed yesterday, while the Seberang Prai acquisition is expected to be completed by month-end.

Axis REIT recorded an overall portfolio occupancy rate of 97.22% in 4QFY11, its highest ever (3QFY11: 96.83%; 4QFY10: 95.73%). This is expected to increase by 2QFY12 when Quattro West’s new tenant moves in, increasing the asset’s occupancy rate to 100% from 89.45%. Lease expiry for the next three years will be 16.98%, 19.13% and 22.41% of net leasable area (NLA), hence lease renewal risk will be higher in 2013 and 2014.

Axis REIT will be looking to spend at least RM20 million in capital expenditure for asset refurbishment in FY12. The major asset enhancement works will be on Wisma Bintang, where the scope of work includes the construction of a four-storey office block and the refurbishment of the façade of Lots 13A and 13B. Work is expected to start in 3QFY12, with completion by 1QFY13. Other assets lined up for refurbishment are: (i) Subang Hi-Tech (40% completed); (ii) Infinite Centre (work to start in 1QFY12); and (iii) Axis Eureka (pending proposal).

Axis REIT’s current gearing level stands at 0.24 times (from 0.35 times), after we factor in the higher asset values and lower borrowings. The lower gearing will give Axis REIT plenty of debt headroom for the acquisition of new assets, although it will likely keep long-term gearing around its internal target of 0.35 times.

Axis REIT will try to maintain its weighted average cost of debt at about 4.5% (currently 4.66%). The management intends to do this by: (i) restructuring its short-term borrowings into medium- to long-term loans with lower spreads; and (ii) issuing long-term sukuk bonds as part of its debt funding model.

We raise slightly our target price for Axis REIT to RM2.72 (from RM2.70) based on a target yield of 6.45% on our revised FY12 dividends per unit (DPU). We maintain our “market perform” recommendation on Axis REIT. We like Axis REIT as it continues to deliver on its DPU, even with the placement of new units that could have potentially resulted in a DPU dilution. The MREITs continue to be the defensive picks for property exposure. — RHB Research Institute, Jan 18


This article appeared in The Edge Financial Daily, January 19, 2012.



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Axis REIT aims to grow assets to RM2b by 2013

KUALA LUMPUR: Axis Real Estate Investment Trust (Axis REIT) aims to grow its asset portfolio by 56% to the RM2 billion mark by next year from the current size of RM1.28 billion.

In the nearer term, the REIT targets to achieve up to RM1.6 billion in assets by the end of this year, beginning with the addition of two warehouses in Penang with a combined value of RM110.5 million this month.

Axis REIT is eyeing RM545.3 million worth of acquisitions in the near to medium term, CEO Stewart Labrooy said during the announcement of the company’s 4QFY11 unaudited financial results yesterday.

It had about RM411.7 million or about a third of its present total assets value when listed six years ago.

The company borrows to fund its new acquisitions and it carries out routine placements to keep the gearing level below 35%. Last month, it issued 75.2 million units of RM2.45 each to raise RM184.2 million to bring down its gearing ratio to 24% from 38.2%, a historical high.

Its fifth and next placement will take place sometime this year, and will potentially involve 90 million new units or 20% of the existing approved fund size of 453.8 million units to raise up to RM240 million.

The company’s net profit for its FY11 ended Dec 31 dipped 20.2% to RM81.05 million from RM101.35 million a year ago.

Labrooy said this was due to a revaluation surplus recorded in 2010, amounting to RM45.6 million or nearly 45% of net profit that year.

Its realised income after taxation, excluding the surplus, grew 23.3% to RM64.8 million from RM52.6 million the previous year. Revenue rose nearly 28% to RM114.73 million from RM89.9 million before.

Rental income rose by more than a third due to the contribution from two new properties, higher occupancy rates with an average of 97.2% and positive rental negotiations. The company disposed of one property last year, resulting in a realised gain of RM784,813 which was distributed to unit holders as part of its second interim dividend for 2011.

It will pay out 17.2 sen in distribution per unit (DPU) for 2011, following a final income distribution of 1.4 sen per unit end-February.

Shares in Axis REIT closed unchanged at RM2.70, an all-time high for the stock.


This article appeared in The Edge Financial Daily, January 18, 2012.



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Axis REIT up on plans to increase assets portfolio

KUALA LUMPUR (Jan 18): AXIS Real Estate Investment Trust (Axis REIT) shares advanced on Wednesday after the company said it has targeted to increase its total assets portfolio from RM1.28 billion at end-2011 to RM2 billion by 2013.

At 10.55am, Axis REIT added three sen to RM2.73 with 5,000 units done.

Axis REIT said on Tuesday that in the immediate term, it expects its portfolio increase to about RM1.4 billion once it completes two property acquisitions at the end of this month.

Axis REIT has identified PROPERTIES [] worth RM545.3 million for possible acquisitions and is conducting due diligence on a number of them.

RHB Research maintained its Market Perform rating on Axis REIT and raised its fair value for the stock to RM2.72 from RM2.70 previously.

“Our EPS forecasts have been revised slightly by 0.8-1.1% for FY12-14 after we factor in lower interest expenses,” the research house said on Wednesday.



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Stocks to watch: Tenaga, Proton, Bina Puri, Nextnation

KUALA LUMPUR (Jan 18): Stocks on Bursa Malaysia could see some positive upside on Wednesday, as sentiment is underpinned by firmer close on regional markets after the favourable GDP data growth in China.

Reuters reported that the slightly better economic news from China and Germany countered concerns over Europe's debt crisis on Tuesday, lifting European shares and the single currency, but Greek default fears and a looming debt sale by Spain held gains in check.

The latest survey of German economic sentiment, conducted by the ZEW think tank, posted its biggest ever monthly rise in January, easing fears of a recession in Europe's largest economy.

Among the stocks to watch on Wednesday include TENAGA NASIONAL BHD [], PROTON HOLDINGS BHD [], BINA PURI HOLDINGS BHD [] and NEXTNATION COMMUNICATION BHD [].

Hard disk drive manufacturers could see trading interest again after Western Digital Corp expected its two factories in Thailand to return to pre-flood production levels by September after the planned resumption of operations at its Navanakorn plant in March.

Western Digital, hit hard by the floods, resumed production at its Bang Pa-in plant in central Ayutthaya on Nov. 30 and its objective is to bring back its capacity to rapidly support its customers.

Reuters quoted Western Digital president and CEO John Coyne said the impact of the floods had reduced its output by 30%.

Tenaga Nasional Bhd expects to return to black in the second quarter ending Feb 2012, boosted by the RM2 billion received from Petroliam Nasional Bhd and the government under the fuel cost-sharing mechanism.

It posted a net loss of RM224.70 million for the first quarter ended Nov 30, 2011 compared to net profit RM716.50 million a year earlier. The losses were due mainly to 29.5% increase in operating expenses due to continued use of oil and distillate as alternative fuel to generate electricity.

Meanwhile, a day after DRB-HICOM BHD [] emerged as the successful bidder for Khazanah Nasional Bhd’s 42.7% stake in Proton Holdings Bhd, DRB-Hicom was actively buying up the shares from the open market.

DRB-Hicom bought 39.927 million Proton shares or 7.27% stake via open market at prices ranging from RM5.40 to RM5.47 per share.

Bina Puri Holdings Bhd’s Pakistan subsidiary has inked a concession agreement with the National Highway Authority of that country to build a 136km-long motorway under a build-transfer-operate concept for a contract value of RM864 million .

It said on Tuesday that its subsidiary, Bina Puri Pakistan (Private) Ltd had signed the 28-year concession agreement for the conversion of the existing four-lane Karachi-Hyderabad superhighway into a six-lane motorway.

Bina Puri said the CONSTRUCTION [] cost amounted to RM644 million and that the construction, upgrading and rehabilitation of the motorway is to be completed over 30 months, adding that it expected the groundbreaking to be sometime in March 2012.

Nextnation Communication Bhd expects cumulative profit of about US$7 million over the initial period of three years from its IT infrastructure project with Indonesia’s PT Inovisi Infracom, Tbk.

IOI CORPORATION BHD []’s subsidiary Multi Wealth (Singapore) Pte Ltd has won the tender bid for a parcel of land in the island republic for S$408 million (RM995.50 million).

AXIS Real Estate Investment Trust (Axis REIT) has targeted to increase its total assets portfolio from RM1.28 billion at end-2011 to RM2 billion by 2013. In the immediate term, it expects its portfolio increase to about RM1.4 billion once it completes two property acquisitions at the end of this month.

Axis REIT has identified PROPERTIES [] worth RM545.3 million for possible acquisitions and is conducting due diligence on a number of them.



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Axis REIT posts lower net income for 4Q

KUALA LUMPUR: Axis Real Estate Investment Trust Bhd (Axis REIT) posted a 21.9% decline in net profit for 4QFY11 ended Dec 31 to RM31.98 million from RM40.94 million a year ago.

Revenue for the quarter rose 12.1% to RM29.81 million from RM26.59 million a year ago, while basic earnings per share fell to 8.2 sen from 10.89 sen previously.

In a filing with Bursa Malaysia yesterday, Axis REIT said its total expenditure for 4QFY11 was RM13 million, of which RM4.6 million was attributable to property expenses and RM8.41 million to non-property expenses, while its realised income before taxation and available for distribution for 4QFY11 amounted to RM16.8 million.

For FY11, its net profit was down 20.03% to RM81.05 million from RM101.35 million in 2010, while its revenue rose 27.7% to RM114.73 million from RM89.85 million.

Axis REIT said total expenditure for FY11 was RM49.9 million of which RM17.36 million was attributable to property expenses and RM32.54 million to non-property expenses, while its realised income before taxation and available for distribution amounted to RM64.83 million.
Most of the RM13.21m for the enhancement of its properties were spent on the refurbishment of Menara Axis and Crystal Plaza.

To date, Axis REIT said it has paid a total income distribution of RM59.39 million to unitholders and has set aside RM6.35 million for income distribution as the final distribution, which translates to 1.4 sen per unit to be paid on Feb 29.

It added that RM13.21 million was incurred for the enhancement of its properties during 2011, with most of the expenses being spent for the refurbishment of Menara Axis and Crystal Plaza.


This article appeared in The Edge Financial Daily, January 17, 2012.



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Axis REIT to increase total assets to RM2 bn by 2013

KUALA LUMPUR (Jan 17): AXIS Real Estate Investment Trust (Axis REIT) has targeted to increase its total assets portfolio from RM1.28 billion at end-2011 to RM2 billion by 2013.

It said on Tuesday that in the immediate term, the company, which focuses on commercial, office and industrial PROPERTIES [], expects its portfolio increase to about RM1.4 billion once it completes two property acquisitions at the end of this month.

Axis REIT has identified properties worth RM545.3 million for possible acquisitions and is conducting due diligence on a number of them.



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Maybank Research: Axis REIT 2011 results below expectations

KUALA LUMPUR (Jan 17): Maybank Investment Bank Research said Axis REIT’s 2011 results were below its expectations at 92% of its forecast but within consensus estimates.

It said on Tuesday the shortfall was mainly due to the delays in its acquisitions of the DHL and industrial buildings in Seberang Perai, which is a mere timing issue.

“2011 gross distribution per unit (DPU) of 17.2sen (6.4% yield) was in line. We continue to like Axis REIT's hands-on management and its proven track record in growing its dividend income stream. Axis REIT remains our top pick for the sector,” it said.



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Axis REIT 4Q net profit falls 21.9% to RM31.98m

KUALA LUMPUR (Jan 16): Axis Real Estate Investment Trust (Axis REIT) net profit for the fourth quarter ended Dec 31, 2011 fell 21.89% to RM31.98 million from RM40.94 million a year ago, due mainly to property and non-property expenses.

It said on Monday that revenue for the quarter rose 12.1% to RM29.81 million from RM26.59 million in 2010.

Earnings per unit was 8.20 sen compared to 10.89 sen a year earlier, while net assets per unit was RM2.08.

For the financial year ended Dec 31, Axis REIT’s net profit fell 20.02% to RM81.05 million from RM101.35 million in 2010, while revenue for the year rose to RM114.73 million from RM89.85 million.

Reviewing its performance, Axis REIT said that for the financial year ended Dec 31 the total expenditure was RM49.89 million, of which RM17.36 million were attributable to property expenses and RM32.54 million to non-property expenses.

Meanwhile, realised income before taxation and available for distribution amounted to RM64.83 million, it said.

Axis REIT said that to-date, it had paid a total income distribution of RM59.39 million up to Nov 25, 2011, and that it had set aside RM6.35 million for income distribution as the final distribution which translates to 1.40 sen per unit to be paid on Feb 29, 2012.

It said a total of RM13.21 million was incurred for enhancement of the PROPERTIES [] during the year, with most of the expenses being spent for the refurbishment of Menara Axis and Crystal Plaza.

On its prospects, Axis REIT said in view of satisfactory performance of its existing investment portfolio and its growth strategy to actively pursue quality acquisitions, it would be able to maintain its current performance for the coming quarter and the rest of the financial year ending Dec 31, 2012.



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Axis REIT unit placement oversubscribed

KUALA LUMPUR: Axis Real Estate Investment Trust (Axis REIT) saw a good response to its shares placement exercise.

In a statement to Bursa Malaysia yesterday, Axis REIT said the 75.18 million units were placed out at RM2.45 each. Acquirers of the new shares are expected to make payment within five market days from the price fixing date of Nov 18 while trading of the new units is expected to begin on Dec 7. The property trust did not specify who the investors are, and the oversubscription quantum for its latest placement which raised RM184.2 million. Axis REIT closed at RM2.57 yesterday.

In a separate statement, Stewart LaBrooy, CEO and executive director of Axis REIT Managers Bhd, which manages Axis REIT, said investors’ continuing interest in the property trust underlined the efforts of the manager to improve the stock’s liquidity, deliver higher income distribution, and expand the property trust via yield-accretive acquisitions.

Upon completion of the exercise, Axis REIT’s issued share capital will expand to 451.08 million units. This translates into a market capitalisation of RM1.16 billion based on the unit’s closing price yesterday.


This article appeared in The Edge Financial Daily, November 22, 2011.



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Axis REIT private placement of 75m units oversubscribed

KUALA LUMPUR (Nov 21): Axis-REIT’s proposed private placement of 75.18 million units has been oversubscribed by multiple times.

Axis REIT Managers Bhd, the management company, said on Monday the private placement represents 20% of the existing approved fund size of 375.90 million units and will increase the approved fund size to a maximum of 451.08 million units.

“The gross proceeds from the private placement which amounts to approximately RM184.20 million will be used to pare down the borrowings of Axis-REIT for the financial year to-date; lowering the gearing to 24%; providing Axis-REIT with sufficient headroom for more acquisitions,” it said.

The CEO of Axis REIT Managers, Stewart LaBrooy said the continuing interest in the Axis-REIT stock underlined the manager’s ongoing efforts to improve stock liquidity as well as, delivering improved distributions and increasing the size of the Trust through yield accretive acquisitions.

On completion of the placement and the conclusion of the latest acquisitions, Axis-REIT would have RM 1.39 billion in assets under management and a market capitalisation of over RM 1.15 billion. Trading of the new units is expected to start at 9am on Dec 7.



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No surprise from CMMT, Axis REIT

CapitaMalls Malaysia Trust (CMMT) was among the first real estate investment trusts (REIT) to report 3Q11 earnings. The trust continues to fare well, with distributable income for the year to date slightly ahead of the forecast made in its prospectus for listing back in July 2010.

Gross revenue totalled RM57.8 million in the latest 3Q11, including contributions from the extension of Gurney Plaza. Acquisition of the latter was completed at end-March this year. Income available for distribution for the quarter stood at RM29.8 million, bringing the total for the year to date to RM85.6 million.

Contributions from all three shopping malls in CMMT’s portfolio were steady. Occupancy ranged from 98.4% for Sungei Wang Plaza to 98.6% for Gurney Plaza and 99% for The Mines. The average occupancy in 3Q11 stood at 98.7%, not varying much from the 98.7% to 99.1% recorded in 1Q11 to 2Q11 respectively. The trust also maintained positive rental reversion of about 6.7% for leases renewed so far this year.

Gross yield for CMMT estimated at 6%
At the current pace, CMMT is on track for our estimated income distribution totalling roughly 7.85 sen per unit for the year, of which 3.9 sen per unit has already been paid earlier. CMMT will trade ex-entitlement for another distribution of 2.83 sen per unit on Nov 8. The total distribution translates into a gross yield of about 6% at the prevailing unit price of RM1.31 — a fairly attractive return compared with prevailing bank deposit rates.

Earnings for REITs are fairly defensive, although they are still exposed to economic cycles to varying degrees depending in part on the type of properties (and their locations) in the portfolio. For instance, well-managed shopping malls carry relatively lower risks, compared with say, the commercial office market, which may suffer on forecasts of excess supply. Consumer spending, on the other hand, is expected to stay quite resilient.



CMMT is managed by a joint-venture company between CapitaMalls Asia, which is listed on the Singapore Stock Exchange and one of Asia’s largest shopping mall developers, owners and managers, and Malaysian Industrial Development Finance Bhd.

Premium for size and liquidity
The trust’s three investment properties — with net lettable area of more than two million square feet — are valued at RM2.43 billion. Its book value stood at RM1.06 per unit (after taking into account the as yet unpaid income distribution for 3Q11). Thus, at the current price, CMMT is trading at more than 1.2 times book value.

We believe this premium is attributable in part to its relative size and liquidity. It is the largest listed retail-focused REIT on the local bourse with assets and market capitalisation that are second only to Sunway REIT.

CMMT is in the midst of acquiring the East Coast Mall in Kuantan for RM330 million. The acquisition is slated for completion by end-2011. The four-storey mall with net lettable area of about 440,000 sq ft was completed in 2008 and currently has occupancy of about 97%. The acquisition will be funded by the issuance of 262 million new units priced at RM1.26 each.

We forecast that CMMT will be able to maintain income distribution at roughly 7.9 sen per unit in 2012, assuming a 100% payout based on our forecast earnings and enlarged units in circulation.

Axis continues to expand portfolio
Axis REIT, on the other hand, has a slightly more diversified portfolio of assets with properties in the office, logistics and retail warehouses as well as office/light industrial segments.

Axis has been among the most active REITs in terms of expanding its portfolio. From the initial five properties (on its listing back in August 2005), its portfolio now consists of 27 properties valued at a combined RM1.26 billion with an average occupancy of 96.8% in 3Q11.

A total of five properties were acquired in 2010, including two logistics warehouses in Seberang Prai, Tesco Hypermarket in Johor, Axis PDI Centre and Axis Technology Centre.

For the current year, Axis completed the acquisitions of a logistics warehouse in Johor and an office building in Cyberjaya for RM81.3 million and disposed of the Axis North Port Logistics Centre for RM14.5 million.

It is currently in the midst of finalising the purchase of another logistics warehouse in Seberang Prai valued at RM59 million as well as a sale and leaseback of a three-storey office block and logistics warehouse from DHL Properties for RM48.5 million. With several other properties under assessment, we expect the trust will stick to its strategy of expanding portfolio in the foreseeable future.

Following the recent acquisitions, gearing has risen to 38.2% as at end-September, up from about 31.3% since its last placement exercise in 3Q10. To bolster its balance sheet and fund future purchases, Axis is planning to issue up to 75.2 million new units.

Gross yield estimated at 6.5%
We estimate income distribution to total roughly 17.2 sen per unit for the current year based on 100% payout, of which 13 sen has already been paid in the last three quarters. That translates into a gross yield of roughly 6.5% at the prevailing unit price of RM2.63. Axis is currently trading at about 1.34 times its book value of RM1.96 as at end-September.


Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.


This article appeared in The Edge Financial Daily, November 4, 2011.

Axis REIT marching to the beat of its own drum

Axis REIT (Oct 24, RM2.52)
Maintain buy with lowered target price of RM2.75 from RM2.90: Visible near-term growth with Axis REIT’s recent proposed acquisition of a logistics warehouse in Seberang Prai, which will boost revenue by RM6.9 million in FY12F (assuming completion in FY11).

The REIT has another five acquisitions valued at RM225.5 million that are being assessed (expected completion 2012) with estimated yields of 8% (based on Axis’ yield hurdle), tenures of more than five years and triple net leases ensuring relatively low property expenses.

Further enhancements to existing assets should bolster revenue growth via increased net lettable area (Menara Axis: 6,700 sq ft; Crystal Plaza: 15,000 sq ft) and higher revaluation gains (refurbishment of Infinite Centre, Wisma Bintang and Kayangan Depot).

Axis REIT will likely fund asset acquisitions via the announced 75.2 million-unit placement (which could raise about RM170 million) and income redistribution exercise (to commence with 3Q11 distributions).

At 38.2% gearing (based on total asset value) as at Sept 30, we believe it may issue RM300 million of long-term sukuk bonds to refinance short-term revolving credit (RM340.1 million as at Sept 30; RM198 million due in 2011) to lengthen loan expiry profiles and lock in lower interest rates.


We have raised our FY12F/FY13F earnings by 18.3%/25.7% on higher assumed asset acquisitions. We maintain our “buy” call, but reduce target price by 15 sen to RM2.75 from RM2.90 as we roll over our valuation base to FY12F and update our discounted cash flow assumptions (7.2% weighted average cost of capital, 0.45 Beta, 2.5% terminal growth). — Hwang DBS Vickers Research, Oct 24


This article appeared in The Edge Financial Daily, October 25, 2011.

Axis REIT buys DHL’s warehouse in Penang for RM48.5m

KUALA LUMPUR: Axis REIT Managers Bhd is buying a logistic warehouse in Bayan Lepas, Penang from DHL PROPERTIES [] (Malaysia) Sdn Bhd for RM48.5 million.

Axis REIT said on Tuesday, Oct 25 that it would leaseback the property to DHL for a total lump sum cash consideration of RM48.5 million.

It said its trustee OSK Trustees Bhd, has signed the agreement for the acquisition and leaseback of the three-storey office block and warehouse complex measuring 3.08 ha with a tenure of 60 years expiring on Jan 22, 2062.

“The property has a gross built-up of approximately 231,940 sq ft and will be leased back to DHL Properties for five and five year lease term,” it said.

Axis REIT Managers said the corporate exercise was to provide unit holders with stable distribution and to achieve growth in net asset value (NAV) per unit of the fund. This would be through acquiring properties which meet the manager’s investment criteria.

“The proposed acquisition and leaseback of the property is consistent with the investment objective and strategy of Axis-REIT and it will be accretive to Axis-REIT’s distributable income.

“The proposed acquisition and leaseback of the property will at the same time diversify and enlarge Axis-REIT’s portfolio of properties and is expected to benefit the fund in the long term from economies of scale,” it said.

Buy Axis REIT shares: OSK

Axis Real Estate Investment Trust (REIT) is expected to issue sukuk bonds worth RM300 million in the near-term to refinance its short-term debt, extend its debt expiry profile and lock in lower interest rate.

As at Sept 30, Axis REIT short-term debt stood at RM340 million, with RM198 million due this year.

However, it is likely REIT may draw down a portion first, given the revolving credit due to the maturity in 2011, and planned unit placement, HwangDBS Vickers Research said in a statement today.

"At 38.2 per cent gearing (Sept 30) based on total asset value, the company could still take on around RM151.1 million in debt before hitting the 50 per cent threshold.

"This is unlikely as impending capital management exercises should supplement its existing funding for asset acquisition purposes and bring it to a more comfortable low around 30 per cent level," it said.

The research firm maintained its "buy" call on the REIT and reduced the target price by 15 sen to RM2.75 from RM2.90.
-- Bernama

REITs attractive in turbulent market

KUALA LUMPUR: As market volatility drive investors toward defensive stocks, real estate investment trusts (REITs) have come under renewed interest as investors look to reduce risk of capital loss and seek stable returns.

Among the Malaysian REITs that have seen better days since the global market selldown in early August are Sunway REIT (SunREIT), Axis REIT and CapitaMalls Malaysia Trust (CMMT).

The three REITs have seen higher volumes traded since late July with their respective unit prices hitting their peak in August, while still maintaining high level of interests recently.

This appears to coincide with the weak and volatile sentiment in markets worldwide that drove investors to the sidelines.

Yesterday, CMMT’s share price closed at RM1.30 (RM1.95 billion market cap), up from about RM1.02 in the beginning of the year. CMMT is a purely retail properties-based REIT while SunREIT’s portfolio comprises retail, hospitality and office properties.

SunREIT and Axis REIT closed yesterday at RM1.14 and RM2.46, respectively, giving them a market cap of RM3.07 billion and RM924.7 million. The former had gained about 10.7% year-to-date (YTD) while Axis was up about 3.8% YTD.

At yesterday’s prices, CMMT and Axis were traded at about 6% and 7.1% annualised yield for FY11 ending Dec 31, while SunREIT was priced at 5.8% historical yield for FY11 ended June 30.

Nevertheless, not all REITs have fared well, with some registering a drop in their unit prices YTD. While lower unit prices could mean higher dividend yield, note that some have returned flat or lower dividend payments.

Hektar REIT, which owns several small malls, saw its unit price falling 6.7% YTD to close at RM1.26 yesterday. While its annualised dividend yield was widened to 7.93% for FY11 ending Dec 31, its dividend payment for 1HFY11 was flat at five sen per unit.

The unit price of hospital-backed REIT Al Aqar KPJ REIT meanwhile has also fallen about 4.5% YTD to RM1.07 yesterday. The REIT recently distributed 5.17 sen as the first income distribution for FY11 ending Dec 31, despite earlier proposing to pay 3.3 sen.

UOA REIT, which owns several office blocks, had hit a six-month high of RM1.48 on July 26 before market pressures pushed down its prices to RM1.33 yesterday, falling about 11.3% YTD. UOA’s 1HFY11 dividend has dropped to 4.89 sen (annualised yield of 7.4%) from 5.15 sen previously.

Analysts stress that the two most important factors to consider when evaluating the prospects of a REIT are the property segment it occupies and its proposed expansion plan to grow value and dividend returns.

REITs backed by office properties are currently not the flavour of the month due to the oversupply of office spaces and consequently, an expected pressure on earnings growth.

Instead, many analysts prefer retail REITs particularly those that own quality retail malls in good locations.

Although retail REITs are still relatively attractive, analysts warn that this segment could in the longer term face higher supply and increased competition for tenants.

“Retail spaces should see some incoming supply but it will still be a better bet than office REITs,” said a property analyst.

Axis REIT has also been featured as analysts’ top picks for REITs who like its mix of office and industrial real estate.

“Aside from the industrial properties which we like, Axis REIT is secured by strong tenants and have an aggressive expansion plan,” said the analyst.

Maybank IB Research analyst Wong Wei Sum noted that some REITs are currently looking attractive due to their more stable income stream and dividend yield at an average of 6% to 7%.

Nevertheless, as REITs return to focus, a fund manager pointed out that the increased interest can mostly be attributed to funds but not retail investors.

“Retail investors largely lack an understanding of REITs but REITs is quite useful to have in your portfolio when the market is unpredictable,” he said.

This article appeared in The Edge Financial Daily, October 21, 2011.