KEY INVESTMENT HIGHLIGHTS

• Proposed to undertake private placement
• Private placement for repayment of borrowings
• Lower gearing ratio
• Earnings forecast maintained
• Maintain BUY with an unchanged TP of RM2.14

Proposed to undertake private placement. Axis REIT proposed to undertake a placement of up to 263m units, representing up to approximately 15.05% of the total number of Axis REIT units issued. The actual number and issue price of the of placement units will be determined at a later stage. The proposed placement is expected to be completed by 4QFY24.

Private placement for repayment of borrowings. Axis REIT intends to use entire of the proceeds from private placement for repayment of bank borrowings. Note that private placement has been part of capital management of Axis REIT and hence we are neutral on the fund-raising exercise. Recall that Axis REIT announced private placement in November 2022 while previous private placement was completed in December 2021.

Note that latest gearing ratio of Axis REIT stood at 0.36x as of 2QFY24.

By utilising proceeds from private placement for repayment of bank borrowings, it will lower gearing ratio of Axis REIT and allow Axis REIT to have sufficient financial headroom to make future asset acquisitions.

Lower gearing ratio. Gearing ratio of Axis REIT is estimated to reduce to 0.33x from 0.36x post private placement. Note that gearing ratio after private placement has factored in the recent acquisition of assets.

Meanwhile, the gross financing cost saving is estimated at approximately RM19m which is expected to lift FY25F/26F earnings by 9.8%/9.4%.

Nevertheless, earnings per unit (EPU) for FY25F/26F is expected to dilute by 2.5%/2.8% due to higher share base post private placement.

Maintain BUY with an unchanged TP of RM2.14. We make no changes to our earnings forecast for FY24F/25F/26F pending completion of the private placement. Our TP is based on Dividend Discount Model (DDM). We remain positive on Axis REIT as its long-term outlook 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 - 2 Sep 2024