Axix REIT asset cancellation disappointing, but still accretive
KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank Research) is mildly disappointed on the termination by Axis Real Estate Investment Trust (Axis REIT) to acquire an industrial property in Pelabuhan Klang, Selangor for RM46 million with Hai San & Sons and Hai San Holdings Sdn Bhd.
The acquisition was called off as both parties were unable to mutually agree on the terms of the proposed sale and purchase agreement (SPA) within the contemplated timeline.
Maybank Research said the acquisition was supposed to be yield accretive whereby its estimated net yield from the property of seven per cent is higher than the cost of capital of five per cent.
“Furthermore, the asset is to be backed by a long triple lease agreement with step-up basis if it were to be acquired and leased back to the sellers,” it said.
“Nonetheless, we understand that Axis REIT maintains its strategy to be active in the acquisitions of industrial/office assets which are earnings accretive to the trust.”
Based on its gearing of 33 per cent as at end September 2015 and its gearing target of 40 per cent, the research house believed the REIT
Furthermore, the asset is to be backed by a long triple lease agreement with stepup basis if it were to be acquired and leased back to the sellers.
Maybank Research
has room for more acquisitions.
“We note that Axis REIT is currently assessing two assets for acquisition which are located in Pasir Gudang, Johor; and Bayan Lepas, Penang with total estimated value of RM140 million.
“We trim our FY16/17 net profit forecasts lower by 3.3 and 3.1 [er cent respectively to reverse out our earlier assumptions of rental income from the asset purchase.
“This resulted in a slightly lower target price of RM1.55.”