KUALA LUMPUR: Maybank Investment Bank Research has maintained its Axis Real Estate Investment Trust (REIT) as its top sector pick following its second quarter results that were in line with expectations.

       The research house, which has a "buy" call on the sector and a target price of RM2.20, said its earnings assumptions were unchanged with near-term EPU and DPU growths mainly driven by new assets, stable portfolio occupancy and some positive rental reversions.

       "We have assumed five new assets in FY21E (completed four acquisitions in YTD21) – contributing about 6% to Axis’ revenue," it added.

       Axis REIT's gross gearing of 0.36x as at end 2Q21 supports more asset purchases and it is currently eyeing two warehouses valued at RM107 in total, and about RM135mil worth of assets for acquisitions.

       In 1Q21, the REIT's core net profit grew 11% year-on-year (y-o-y) and 7% quarter-on-quarter to RM34.5mil, bringing 1H21 core earnings to RM66.7mil, 9% higher y-o-y.

       2Q21 bottomline y-o-y growth continued to be supported by new assets, having acquired/developed six properties since end-2Q20, positive rental reversions at selected properties, and favourable portfolio occupancy rate of 94%.

       Notable occupancy increases in 2Q21 included Axis Industrial Facility @ Rawang at 48% (expected at 100% by 4Q21) and D8 Logistics Warehouse at 100%, where both properties were vacant in 1Q21.

       Meanwhile, Maybank IB noted that Malaysia’s movement control order had limited/negligible impact to Axis in 1H21, namely on car park income.