Axis-REIT to gain from asset buy


  • Property
  • Thursday, 09 Oct 2014

AXIS-REIT

By RHB Research

Target price: RM3.60

Neutral (maintained)

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.

BINTULU PORT

By Kenanga Research

Target price: RM8.08

Outperform

KENANGA Research said a Bintulu-Samalaju site visit made it feel more reassured of Bintulu Port Holdings Bhd’s (BPHB) long-term prospect underpinned by the bulk of capital expenditure (capex) to be spent on Samalaju Port Phase 1 project.

It added that there was higher certainty of demand in Samalaju Port’s services backed by confirmed industrial investors within the industrial park proximity.

“We do not foresee any major power supply issues for Samalaju Industrial Park moving forward despite an outage which hit Press Metal’s Mukah smelting plant in 2013, as the Bakun Dam is now operating optimally.

“Any minor failure in the water turbines would not pose any problems to the overall power grid,” Kenanga Research said.

To-date, it said five contracts had been awarded by BPHB to respective contractors, amounting to about RM1.5bil, accounting for 83.3% of the total earmarked capex for Phase 1 of Samalaju Port.

“We have gathered from the management that the construction progress of the Phase 1 project is still on track and they have maintained their pre-scheduled deadline for the project in the second quarter of 2016,” the research house said.

“However, there are indications for the group to raise an additional RM900mil though sukuk issuance.

“As of now, it has only managed to secure RM1.1bil financing for the project from a mixture of share placement and government grant.”

The research house said the Samalaju Port Phase 1 project would provide robust cashflow streams for BPHB in the long term and also diversification in terms of cargo mix handled by the group, which was liquefied natural gas-heavy at the moment.

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