09 October 2014

Axis-REIT to gain from asset buy

  09 October 2014

RHB Research said it viewed Axis Real Estate Investment Trust’s (Axis-REIT) proposed acquisition of an industrial asset in the Southern Industrial and Logistics Clusters (SiLC) industrial area, Johor, positively as it might help to further drive its earnings growth.

As Axis is targeting to complete the injection by year-end, the research house said it was lifting its financial year 2015 forecast (FY15F) estimates by 5% after imputing the contribution from the acquisition.

It said its dividend discount model-based target price rose to RM3.60 (-1.5% upside) post-earnings revision.

Axis has announced the proposed sale-and-leaseback of a steel fabrication facility in the SiLC industrial area for RM153.5mil.

“The gross asset yield is decent, at about 7.6%,” RHB Research said.

The asset has a total gross floor area of 504,000 sq ft and comprises six buildings. The asset will be funded entirely through debt.

Based on the announcement, the tenant will be signing a 15-year lease with a rent step-up of 10% every three years.

Axis had previously guided that it could be injecting more assets into its portfolio by year-end.

“Although there could be concerns on the assets’ location within the Nusajaya region, we believe that Axis will be insulated from any vacancy risks.

“This is due to the assets’ long-term lease and the fact that industrial assets remain popular in Johor despite the property market slowdown,” the research house said.

“Post-acquisition, management expects its gearing to increase to 0.39 time, which is still below the Securities Commission’s 0.5 time gearing cap.”

RHB Research said it did not expect any major impact to Axis’ FY14 earnings forecasts.

“However, we lift our FY15F earnings by about 5% after imputing the contributions from this acquisition. We view its aggressive asset acquisitions in recent months positively and believe that more yield-accretive acquisitions could be in the cards going forward to further drive earnings growth,” it added.



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