REIT earnings top expectations, target prices revised up
KUALA LUMPUR: Real estate investment trusts (REITs) surprised on the upside in the first quarter of 2025, with Axis REIT, IGB REIT and IGB Commercial REIT all delivering earnings that exceeded analysts' expectations.
Hong Leong Investment Bank (HLIB) upgraded its forecasts across the board, citing strong rental income, improved occupancy and cost efficiencies as key drivers of the outperformance.
Axis REIT posted a 25.5 per cent year-on-year rise in core net profit to RM50.2 million, driven by positive rental reversions and reduced financing costs.
Portfolio occupancy improved to 97 per cent and the trust declared a dividend of 2.5 sen per unit.
HLIB noted that Axis REIT continues to benefit from its exposure to industrial assets, which remain in demand as multinational firms diversify supply chains amid rising geopolitical risks.
With a strengthened balance sheet following a RM449.7 million private placement last year, it said Axis REIT has the capacity to pursue further acquisitions.
The firm maintained a "Buy" call and raised its target price to RM2.06.
IGB REIT, which owns Mid Valley Megamall and The Gardens Mall, delivered a core net profit of RM110.6 million, up 8.1 per cent from a year ago, on the back of higher rental revenue and flat operating costs.
Both properties remained fully occupied, while a dividend of 3.2 sen per unit was declared.
HLIB expects earnings momentum to be supported by full-year contributions from the newly launched South Court at Mid Valley.
The potential injection of the Mid Valley Southkey portfolio, valued at around RM2.3 billion, is also seen as a strategic growth catalyst.
However, the firm maintained a "Hold" rating, citing limited upside as much of the near-term growth appears priced in. The target price was revised upward to RM2.29.
IGB Commercial REIT recorded a 27 per cent jump in core net profit to RM24 million, exceeding expectations due to stronger occupancy and a sharp reduction in maintenance costs.
The trust's portfolio occupancy rose to 89 per cent, with average rental rates edging higher to RM6.4 per square foot.
This was achieved despite the broader Klang Valley office market, where vacancy rates remain elevated and rental reversions are largely muted.
HLIB highlighted the trust's strategic advantage, particularly its assets within Mid Valley City, which continue to command resilient demand.
The REIT was upgraded to "Buy," with a target price raised to 60 sen from 52 sen.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
an hour ago
- New Straits Times
HLIB: Expanded SST signals fiscal discipline
KUALA LUMPUR: Hong Leong Investment Bank (HLIB) said the expanded Sales and Service Tax (SST) reflects the government's firm commitment to fiscal consolidation, with the 2025 fiscal deficit target maintained at 3.8 per cent of gross domestic product (GDP), down from 4.3 per cent in 2024. The government expects the SST expansion to yield RM5 billion in additional revenue in the short term (equivalent to 0.24 per cent of GDP), with a long-term annual target of RM10 billion (0.48 per cent of GDP). Under the revised SST structure, a 5 per cent to 10 per cent sales tax will be imposed on selected non-essential goods, while the 6 per cent or 8 per cent service tax will be extended to include sectors such as rental or leasing, construction, financial services, private healthcare, private education, and beauty services. To maintain progressivity, the government structured SST into two tiers based on necessity. Essential goods such as bread, milk, cooking oil, and medicine remain exempt. Premium products such as imported seafood and industrial machinery will be taxed. Services mostly used by high-income groups and non-residents, like private education (annual fees above RM60,000), selected banking services, and private healthcare for foreigners, are also within scope. Relief measures include exemptions for business-to-business transactions, group relief, and residential construction or rental. The expanded scope is part of the government's broader initiative to strengthen the fiscal position by increasing and diversifying revenue sources. A portion of the additional revenue generated will be used to enhance public services and create greater fiscal flexibility. HLIB noted the government's plan to rationalise RON95 fuel subsidies through a more targeted framework. While the mechanism is still being finalised, the government aims to shield 85 per cent to 90 per cent of households from substantial price increases, despite concerns over its implementation complexity. On market impact, HLIB views the SST expansion as largely neutral, as it is narrowly targeted and carefully designed to exclude essential goods and services. "While sectors such as construction, banking, and healthcare may appear exposed, we expect any profit impact to be negligible," HLIB said in a note. In construction services, HLIB foresees limited impact on contractors, as most contract structures allow for cost pass-through mechanisms and new project tenders are likely to be repriced, transferring the incremental cost to the end customer. In the financial services sector, the firm does not expect any material impact to banks, as they primarily serve as tax collection agents on behalf of the government. "Based on our estimates, non-essential fee-based revenue accounts for only around six per cent to seven per cent of total sector operating income. Nevertheless, we believe demand for these services will stay fairly inelastic, given limited substitutability," it said. In the private healthcare services sector, HLIB noted that the tax applies only to foreigners, and medical tourism remains a small revenue contributor (around five to 10 per cent) at this stage. "In our opinion, demand should remain intact, backed by Malaysia's strong clinical reputation and continued pricing advantage vs regional peers, even post-SST. Moreover, healthcare services are inherently price inelastic, and we do not expect operators to absorb the tax. Net-net, we see no earnings impact to the sector," it said.
New Straits Times
14 hours ago
- New Straits Times
EPF takes substantial stake in 99 Speed Mart in first investment
KUALA LUMPUR: The Employees Provident Fund (EPF) has emerged as a substantial shareholder in 99 Speed Mart Retail Holdings Bhd after acquiring a 5.02 per cent stake in the home-grown mini market chain via a direct off-market deal. A filing with Bursa Malaysia today showed that EPF purchased 421.79 million shares on June 4, marking its first investment in the company. Details of the seller and transaction price were not disclosed. However, based on 99 Speed Mart's closing price of RM2.06 on the day of the transaction, the block is estimated to be worth RM868.89 million. Founder and chief executive Lee Thiam Wah remains the largest shareholder with a 79.68 per cent stake. At the close today, 99 Speed Mart's shares were up 0.48 per cent or one sen to RM2.10, valuing the company at RM17.64 billion. The company made its Main Market debut on Sept 9, 2024, at an initial public offering (IPO) price of RM1.65, marking Malaysia's largest IPO in seven years. Just months later, it was added to the FBM KLCI component list in December. 99 Speed Mart saw its net profit rose 7.53 per cent year-on-year (YoY) to RM143.18 million in the first quarter ended March 31, 2025 (1Q25), supported by stronger retail sales and store expansion. The company added 246 outlets YoY, bringing its store count to 2,833.
The Star
16 hours ago
- The Star
EPF buys 5.02% stake in 99 Speed Mart via off-market deal
PETALING JAYA: The Employees Provident Fund (EPF) has acquired a 5.02% stake in 99 Speed Mart Retail Holdings Bhd (99 Speed Mart) through a direct off-market transaction, according to a filing with Bursa Malaysia On June 4, the EPF purchased 421.79 million shares in the convenience store chain, marking the fund's first holding in 99 Speed Mart, which became part of the KLCI index in December last year. While details about the seller and the transaction price were not disclosed, the block of shares is estimated to be worth RM868.89mil, based on the retailer's closing price of RM2.06 per share on June 4. Founder and chief executive of 99 Speed Mart, Lee Thiam Wah, remains the largest shareholder with a 79.68% stake in the company. The counter rose by one sen to close at RM2.10, giving the company a market value of RM17.64bil.
