24-04-2025
- Business
- New Straits Times
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.
