Positive outlook for Axis-REIT on land buy proposal

PETALING JAYA: Axis Real Estate Investment Trust’s (Axis-REIT) proposal to acquire an industrial property in Seberang Perai, Penang, from Ann Joo Resources Bhd for RM800mil has analysts excited.

It is worth noting this will be the real estate trust’s largest acquisition.

Axis-REIT plans to lease back the property to Ann Joo for eight years, with an agreed initial monthly rental rate of RM4.16mil, which is equivalent to a gross yield of about 6.2%.

Kenanga Investment Bank Bhd said assuming the interest cost is at 4%, it estimates a RM12.9mil contribution to Axis-REIT’s earnings.

It said the deal is likely to raise the gearing ratio from 0.33 times to 0.50 times.

“For now, we are neutral as we will have to assess other key terms for a fuller picture.

“Hence, due to the limited details on the industrial property and the group’s plans for the industrial plot of land, we keep our earnings forecast and target price (TP) at RM1.96, with a ‘market perform’ call.”

In a report, CIMB Securities said the deal will reinforce Axis-REIT’s expansion into northern Malaysia’s industrial and logistics corridor.

“The industrial property, comprising approximately 135.5 acres of freehold land, has direct access to key logistics networks, including the North–South Expressway and Penang Port,” it said.

It maintained its “buy” call on Axis-REIT with a TP of RM2.33.

It added that it was slightly positive on the proposed acquisition, viewing it as a yield-accretive deal for a prime industrial asset with potential for capital appreciation.

“Assuming full debt-funding and completion by the end of forecast financial year 2026 (FY26), we estimate approximately 8% uplift to the forecast FY27 earnings per unit (EPU) and distribution per unit (DPU), with gearing expected to rise to approximately 42%,” it said.

MBSB Investment Bank Bhd also weighed in on the group, stating the acquisition will lift its FY26 and FY27 earnings forecast by 7%.

“We maintain our earnings forecast pending signing of sale and purchase agreement for the asset acquisition.

“The gearing of Axis-REIT is estimated to increase to 0.42 times from 0.33 times in the third quarter of 2025.

“This may trigger a private placement exercise, as the gearing will be above a comfortable gearing level of more than 0.4 times.”

Meanwhile, Hong Leong Investment Bank (HLIB) Research said the recent rally in unit price limits near-term upside, while the newly announced acquisition will only meaningfully contribute from FY27 onwards.

This had tempered down its short-term bullish stance.

In line with that, the research house said it will raise the FY27 forecast by 6.2%.

Subsequently, it will downgrade Axis-REIT’s call to a “hold” with an unchanged TP of RM2.25.

This is based on an unchanged target yield of 4.3%, pegged to the FY26 DPU.

“We believe the premium valuation remains warranted given Axis-REIT’s proactive acquisition strategy, and its strategic exposure in Johor, which positions it well to benefit from the Johor-Singapore Special Economic Zone theme,” it noted.

HLIB Research expects the acquisition to increase the group’s gearing ratio to 46.8% from 39.5% in its FY27 forecast.