Axis-REIT eyes RM1mil per annum from assets

PETALING JAYA: Axis Real Estate Investment Trust’s (Axis-REIT) potential earnings contribution from its recent acquisition is about RM1mil per annum after deducting financing costs of 4.2%.

This translates to a minimal earnings contribution of less than 1% for financial year 2026 (FY26), according to MBSB Research.

The research house has maintained its earnings forecast pending completion of the acquisition and information on potential rental income.

Axis-REIT is buying leasehold land with buildings presently built on Kawasan Industri Bandar Sultan Suleiman in Klang, Selangor for RM50mil cash, which will be funded by existing bank financing.

It estimated gearing to climb marginally to 0.34-times from 0.33-times in the second quarter of FY25, which is still within comfortable gearing level of Axis-REIT.

Assuming Axis-REIT targets to fetch a rental yield of 6.5% for the assets in Klang, the potential earnings contribution of about RM1m per year.

The research house maintained its target price (TP) for Axis-REIT at RM2.07 a share and its TP is based on the dividend discount model. It remained “neutral” on the stock due to limited upside and unattractive 4.4%.

Nevertheless, it saw a stable long-term outlook for Axis-REIT as earnings growth should be supported by the expansion in its industrial assets portfolio.

Meanwhile, RHB Research maintained its “buy” call with a TP of RM2.23 a share, 9% upside with 5% FY25 yield.

It maintained its earnings forecasts and TP for now.

Its TP implied a FY26 yield of 4.6%, which it said was fair, given the stable outlook for the REIT’s industrial assets, offering a spread of 120 basis points over the 10-year Malaysian Government Bond yield.

The downside risks cited include non-renewal of the REIT’s expiring leases, lower-than-expected rental reversions and cancellation of proposed acquisitions.

RHB is mildly positive on the acquisition, as it is relatively small in scale, about 1% of Axis-REIT’s total assets.

The purchase price of RM50mil is in line with the independent valuation of RM50.3mil.

Based on prevailing rental benchmarks in Port Klang of about RM1.50 per sq ft per month, the asset could deliver a gross yield of 7% once leased, assuming a gross floor area of 240.6k sq ft.

However, the absence of a secured tenant poses a risk of delayed income contributions, unlike its recent acquisitions that were structured as sale-and leaseback transactions.

That said, given the property’s strategic location and long land tenure, leasing prospects should be reasonable.

The asset acquisition marked the second asset acquisition of Axis-REIT in FY25, said MBSB Research.

It acquired an industrial asset in Port Klang for RM80mil cash last month.