Axis REIT’s newest asset may have minimal earnings impact

PETALING JAYA: Analysts have made no changes to their earnings estimates for Axis Real Estate Investment Trust (REIT) following its purchase of its newest asset, stating that the impact on earnings should be minimal.

In a note to clients, MIDF Research said it was “neutral” on the REIT’s proposed acquisition of an industrial asset at Bukit Raja as the acquisition was in line with Axis REIT’s strategy of expanding its industrial assets portfolio.

“Earnings impact from the asset acquisition is expected to be minimal at less than 1% of FY21/22 forecast earnings.

Hence, we make no changes to our earnings forecast for FY21/FY22, ” the research house said.

PublicInvest Research in its note also said it would make no change to its earnings estimates for now pending completion of the deal.

Axis REIT recently said that it had entered into a sale and purchase agreement to buy a plot of freehold land measuring some 20.75 acres in Bukit Raja Selatan Industrial Area, Shah Alam for RM120mil.

“We understand that the said land has good redevelopment potential for a warehouse.

“This acquisition, if it materialises, would constitute a bulk of the initial RM135mil earmarked for new assets targeted in FY21, ” PublicInvest said.

In its note, MIDF also pointed out that the tenancy term for the property was for a period of one year with an option to renew for another four terms of three months each.

“Rental per month for the tenancy term is RM416,700 which translates into a gross yield of 4.2% while rental per month for the renewed period would be RM608,300 which translates into gross yield of 6.1%.

“The gross yield is lower than its historical asset acquisition yield, typically at around 7%, which we think could be due to the redevelopment potential of the asset, ” it said.

MIDF said it had upgraded its call on Axis REIT to “buy” from “neutral” on recent weakness in share price – which has seen a year-to-date decline of 9.9% – as this presents an opportunity for investors to accumulate.

“Outlook for Axis REIT remains stable as its portfolio of industrial assets are relatively shielded from Covid-19 pandemic, ” it said.

MIDF also said the REIT’s net dividend yield was estimated at 4.4%.

PublicInvest meanwhile has maintained its “neutral” call on the stock.

Axis REIT closed RM1.85 apiece yesterday, valuing the whole company at close to RM3bil.

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