[RAM] RAM Ratings affirms Axis-REIT's AA2(s) Senior Sukuk and A1(s) Perpetual Sukuk ratings

RAM Ratings has affirmed the respective AA2(s)/Stable and A1(s)/Stable long-term ratings of Axis REIT Sukuk Two Berhad’s Senior Sukuk and Subordinated Perpetual Sukuk under the issuer’s sukuk programme of up to RM3 bil. The Senior Sukuk rating is anchored by Axis Real Estate Investment Trust’s (the REIT) credit strength as the ultimate obligor under the sukuk programme. The two-notch differential on the perpetual sukuk reflects its deeply subordinated ranking and the issuer’s option to defer distributions, features that increase loss absorption and payment flexibility relative to the Senior Sukuk, while remaining senior only to common equity.

The rating affirmations are underpinned by the REIT’s diversified and high-quality industrial-focused portfolio, stable recurring rental income, prudent capital management and strong access to funding. As at end-March 2026, portfolio occupancy remained high at 94%, while its weighted-average lease expiry of 4.3 years by rental income provides good cash flow visibility. Long-term fixed leases and low- to mid-single-digit rental reversions mitigate earnings volatility, although the portfolio remains exposed to tenant concentration and cyclical demand trends in the industrial and logistics segments.

The REIT’s revenue grew 13.3% in FY Dec 2025, driven by recent acquisitions and positive rental uplifts while the net property income (NPI) margin edged up to 86.6% from 85.9% the previous year. Despite ongoing portfolio optimisation, the REIT’s top line remained broadly stable in 1Q FY Dec 2026, with its NPI margin sustained at 86.4%. The REIT’s leverage stayed comfortably in the low to mid-30% range, contributing to stronger credit metrics in fiscal 2025 as the debt-to-operating profit before depreciation, interest and tax ratio and fixed charge coverage improved to 6.3 times and 3.9 times, respectively, and remained healthy in 1Q fiscal 2026. 

About 60% of the REIT’s financing is on fixed-rate terms, partly limiting earnings and coverage metrics exposure to profit rate volatility. Planned acquisitions, largely debt-funded, in FY Dec 2026 could temporarily weaken leverage and coverage, but we anticipate metrics to recover as the acquired assets begin contributing rental income and management maintains leverage within the current range. A sustained increase in leverage, weaker occupancy or delayed income contributions from acquisitions could reduce rating headroom.


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Joel Thum
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Tan Han Nee
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