Reduction in gearing ratio provides headroom for Axis REIT to undertake more acquisitions
KUCHING: Reduction in gearing ratio provides greater headroom for Axis Real Estate Investment Trust (REIT) to undertake further acquisitions of earnings accretive assets, analysts opine.
To recap, on behalf of the board of directors of Axis REIT Managers Bhd, being the management company of Axis-REIT (manager), Maybank Investment Bank Bhd (Maybank IB) announced that the manager proposed to undertake a placement of up to 100 million units, representing up to approximately 6.09 per cent of the total number of units issued of 1,641,054,038 as at November 3, 2022, being the latest practicable date prior to this announcement.
“Based on our estimates, the gross proceeds of RM178 million will reduce its net debt position to circa RM1.3 billion from RM1.4 billion as at September 30, 2022 while gearing ratio shall reduce to 31 per cent (from 36 per cent),” the research arm of Hong Leong Investment Bank Bhd (HLIB Research).
“From our calculations, the new shares will dilute its FY23f core EPU by 1.5 per cent as a 6.1 per cent expansion in the share base more than offsets a 4.5 per cent earnings enhancement arising from the interest savings.
“Assuming the deal is to be completed, our target price shall fall to RM1.96 based on the same valuation basis.
“Notwithstanding, the reduction in gearing ratio provides greater headroom for Axis REIT to increase its leverage in a bid to undertake further acquisitions of earnings accretive assets.”
HLIB Research also noted that this development is paving way for Axis REIT to achieve its acquisition targets with total estimated value of RM120 million in the coming quarters.
On balance, the research arm is neutral on this development.
Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) opined that the EPU impact is negligible.
“Imputing the theoretical gross financing cost saving of RM6.8 million into our FY23F net income and taking into consideration an enlarged base of 1.74 billion units, overall earnings impact is broadly neutral with our EPU projection dipping marginally from 10.5 sen to 10.2 sen post adjustment,” Kenanga Research said.