Axis REIT’s RM50m industrial land acquisition in Nilai deemed positive by HLIB


AXIS Real Estate Investment Trust’s (Axis REIT) proposed industrial land acquisition in Nilai, Negri Sembilan is positive for the trust, analysts said.

The RM50 million acquisition price is fair for the surrounding industrial space and slightly lower than the current market value of RM51 million, based on an independent valuation, Hong Leong Investment Bank Bhd (HLIB) said.

“We are positive on the acquisition as it is yield accretive, given the net yield of 7% (before Islamic financing cost) versus its current yield of 5.1%.

“With the new assets, our (estimated) earnings for the financial year ending Dec 31, 2020 (FY20) and FY21 will improve by 0.3%,” the research house said in a note yesterday.

Axis REIT told Bursa Malaysia on Tuesday that it intended to acquire a parcel of leasehold industrial land — together with a single-storey factory/ warehouse with a double-storey office annexed — from K-Plastics Industries Sdn Bhd for RM50 million.

The proposed land acquisition will be funded by existing debt facilities and is expected to be completed by end-2019.

Upon completion, the property with a net lettable area of 2.29ha shall be leased back to K-Plastics for a fixed period of 10 years from the commencement date upon completion of acquisition, with an option to renew for another five years.

HLIB has maintained a ‘Buy’ call on the REIT with a target price (TP) of RM2.01, based on a targeted yield of 4.7%.

“Axis REIT intends to utilise a RM50 million debt facility from its existing credit facilities.

“We like Axis REIT due to its high occupancy diversified portfolio and being one of the few Shariah-compliant REITs,” it said.

Meanwhile, MIDF Research is not ruling out a fundraising exercise in the near term as Axis REIT’s gearing level creeps nearer to 40%.

The research firm has revised its TP on the REIT to RM1.83, assuming a new income stream from the new asset.

“Our required rate of return is maintained at 7.5%. Dividend yield for Axis REIT is estimated at 5.1%.

“While we like Axis REIT for its stable recurring income, we believe that the unit price upside is limited at this juncture,” it said.

Shares of Axis REIT closed 0.55% lower at RM1.82 yesterday, with a market capitalisation of RM2.25 billion.