KEY INVESTMENT HIGHLIGHTS

• Industrial asset acquisition
• Expanding industrial asset portfolio
• Earnings forecast revised
• Maintain BUY with a revised TP of RM2.14

Industrial asset acquisition. Axis REIT announced that it has entered into sale and purchase agreements in relation to the proposed acquisition of two industrial properties located at Taman Perindustrian Pulau Indah for a total lump sum consideration of RM158.6m. The purchase price for the first property is RM110m while the purchase price for second property is RM48.6m. The proposed acquisition is expected to be completed in 4QFY24.

Expanding industrial asset portfolio. The proposed asset acquisition is expected to be positive to Axis REIT as it is in line with its strategy of expanding industrial asset portfolio. The two properties are adjoining properties located at Taman Perindustrian Pulau Indah with access to the Shah Alam Expressway (KESAS). The two properties are tenanted by MDSB which involves in warehouse repairs and servicing of containers.

Meanwhile, the acquisition is expected to be yield accretive as gross acquisition yield is at 6.2% which is higher than financing cost. On the other hand, purchase price of RM158.6m is marginally lower than the properties' market value of RM159.2m.

Earnings forecast revised. Axis REIT intends to fund the acquisition via internally generated funds and bank borrowings. We estimate gearing of Axis REIT to inch up marginally to 0.38x from 0.36x in 2QFY24.

Meanwhile, we make no changes to our earnings forecast for FY24 but revise FY25F/26F earnings forecast by +1.6% after factoring in earnings contributions from the asset acquisition.

Maintain BUY with a revised TP of RM2.14. Corresponding to the earnings revision, our TP for Axis REIT is revised to RM2.14 from RM2.12. Our TP is based on Dividend Discount Model (DDM). We remain positive on Axis REIT as outlook for Axis REIT will be underpinned by healthy demand for industrial assets. Hence, we maintain our BUY call on Axis REIT. Meanwhile, distribution yield is estimated at 4.4%.

Source: MIDF Research - 29 Aug 2024