Axis REIT's latest acquisition to boost earnings, is yield accretive — analysts

• On Monday, Axis REIT announced that it is buying the industrial complex and open storage yard from Amsteel, a unit of Lion Industries Corp Bhd.

KUALA LUMPUR (April 23): Axis Real Estate Investment Trust (Axis REIT), which mainly manages offices and warehouses, will gain a boost in earnings with the proposed RM351.8 million industrial acquisitions in Bukit Raja, Selangor, analysts said.

The acquisition of the Amsteel Mills Sdn Bhd properties is expected to generate a yield of 7% for the first three years based on the announced monthly rental rate of RM1.83 million, according to estimates from Kenanga Investment Bank, Hong Leong Investment Bank and MIDF Amanah Investment Bank.

“We view the acquisition positively as it will strengthen Axis REIT’s presence in Bukit Raja, which is a growing industrial area with accessibility to major highways,” said MIDF Amanah, which maintained its ‘buy’ call on the stock.

On Monday, Axis REIT announced that it is buying the industrial complex and open storage yard from Amsteel, a unit of Lion Industries Corp Bhd. The industrial complex covers an area of nearly 60 acres and adjoins Axis REIT’s existing Axis Facility 2, while the storage yard sits just across the property.

The latest deal is Axis REIT’s second purchase from Amsteel since it bought another industrial complex in February for RM49 million. The property is also located in Bukit Raja in the Klang district.

“We are positive on this deal as it is yield accretive,” said Hong Leong Investment Bank, which has a ‘hold’ call on the REIT. The acquisition price is also “rather attractive as this is lower than the prices of some industrial properties in the area”, the research house said.

Axis REIT said the acquisitions — expected to be completed by the end of 2025 — will be funded by existing bank financing. Cash and bank balances totalled RM7.79 million, while its borrowings stood at RM1.55 billion at end-2023, according to the REIT's latest financial statement.

The acquisition will increase Axis REIT’s net debt to RM1.90 billion and raise its gearing to 0.42 times from 0.34 times, still below the 0.5 times limit under REIT listing regulations, according to Kenanga. Still, the deal will be earnings accretive to the tune of 6.5%, the research house flagged.

Axis REIT units rose 1.1%, or two sen, to RM1.86 at the time of writing on Tuesday. The REIT has gained 3.9% so far this year, compared to the 4.7% gain seen on the Bursa Malaysia REIT Index, which tracks 19 trusts.

Analysts, however, remained broadly cautious, with five ‘hold’ calls, one ‘sell’ rating, and five ‘buy’ recommendations. The consensus 12-month target price is RM1.97, according to Bloomberg.

Looking to buy a home? Sign up for EdgeProp START and get exclusive rewards and vouchers for ANY home purchase in Malaysia (primary or subsale)!