PETALING JAYA: Axis Real Estate Investment Trust’s (Axis-REIT) recent proposal to buy an industrial facility is yield accretive at 6.6% net property income (NPI).

       This is at par with its current NPI yields of 6.7% and that is a positive development, as it continues to look into expanding its asset portfolio.

       HLIB Research said with the new asset, Axis-REIT’s financial year 2022 (FY22) to FY23 earnings will improve by approximately 0.3% to 0.6%.

       However, it retained its earnings forecast pending the completion of the acquisition.

       The research house also maintains its “buy’’ call with an unchanged target price of RM2.32 a share. This is based on a targetted yield of 4.6% on the FY22 distribution per unit (DPU).

       Axis-REIT has proposed to buy a property from Axis AME IP Sdn Bhd for RM16.3mil.

       The acquisition price works out to about RM271 per sq ft, which is reasonable for an industrial space in Kulai (about RM260 to RM350 per sq ft based on various websites) based on the valuation made by the independent valuer, HLIB said.

       It said the property is located within Kawasan Perindustrian i-Park, Bandar Indahpura, Kulai, Johor. The location is well-connected via the Second Link Expressway and the North-South Expressway.

       It consists of a single-storey detached factory with an annexed double-storey office building and ancillary building with a total lettable area of 60,000 sq ft.

       The acquisition is expected to be funded by an existing debt facility and is expected to be completed by the first half of FY22.

       With that, its gearing ratio is expected to increase to 33% from 31% (FY21).

       But this is still below the gearing limit of 60% (temporary increment from 50% till Dec 31, 2022) prescribed by the Securities Commission.

       Furthermore, the property is currently 100% tenanted by HQPack Sdn Bhd, which manufactures industrial packaging for the high-end semiconductor industry.

       The lease term is for a fixed period of 10 years and one month with an option to renew for another term of three years. The first three years would be at a monthly rental of RM90,000.

       It added that Axis-REIT already owned nine properties within this industrial park, and this property will enhance Axis’ footprint within the area.