KUALA LUMPUR (April 12): MIDF Research is slightly positive on Axis Real Estate Investment Trust (REIT)’s recent RM390 million asset buy of a logistics warehouse facility in Johor, pointing out that the acquisition is “expected to be yield accretive”.
“Gross acquisition yield is estimated at 6.67% based on gross rental per month of RM2.17 million for the first three years. Lease agreement is for 10 years with step-up lease of 1% every year after [the] first three years. Besides, the proposed acquisition enables Axis REIT to strengthen its industrial properties portfolio whereby outlook for industrial assets remains bright on the back of stable demand for industrial properties,” the research house noted in a Tuesday (April 12) report.
The proposed acquisition will be fully funded by Axis REIT's existing bank borrowings, and MIDF Research estimates the REIT's gearing to climb to 0.44 times from 0.34 times (as of December 2021) post the asset acquisition.
This, the local research pointed out, is below the gearing limit of 50% prescribed by the Securities Commission Malaysia’s guidelines on REITs.
It added that the asset acquisition is expected to positively impact Axis REIT's earnings.
“We revise our FY22/23F earnings forecast by +2.2%/+4.8% after factoring in the earnings contribution from the asset acquisition,” MIDF Research noted.
Post earnings revision, the research house revised its target price for Axis REIT to RM2.08 from RM2.04.
It maintained its "buy" call on Axis REIT as the research house remains positive on its long-term earnings outlook which is backed by stable earnings contribution from its industrial assets.
Meanwhile, it added that net distribution yield is estimated at 4.7%.
Axis REIT announced on Monday that it is acquiring a logistics warehouse facility in Pelabuhan Tanjung Pelepas (PTP) in Johor for RM390 million cash — its largest acquisition to date.
The 1.55 million sq ft property is currently being used for warehousing and is occupied by Equalbase PTP Sdn Bhd’s customers, which include two multinational automotive corporations namely Al Futtaim RDC Malaysia Sdn Bhd and Kuehne + Nagel Sdn Bhd.
Axis REIT’s units were up three sen or 1.64% at RM1.86 at the time of writing.