KUALA LUMPUR: Axis Real Estate Investment Trust's (Axis Reit) recent acquisition of a property from Venice Tulip Sdn Bhd for RM32 million is yield accretive, Hong Leong Investment Bank Bhd (HLIB) said.
The firm said it is positive in the acquisition, given the net property income (NPI) yield is 9.6 per cent versus Axis Reit's current NPI yield of 7.6 per cent.
HLIB said with the new asset, Axis REIT's financial year 2022 (FY22) and FY23 earnings will improve by about one per cent.
"The property is within close proximity to the Johor Port, the world's largest palm oil terminal with a storage capacity of 460,000 tonnes.
"Acquisition price worked out to be at RM116 per sq ft, which is very reasonable for industrial space in Pasir Gudang and it is also lower than market value of RM35 million based on the valuation made by the independent valuer," it said.
HLIB said Axis Reit intends to utilise debt facility from its existing credit facilities.
Hence, its gearing ratio is expected to increase to 37.2 per cent from 36.6 per cent which is still relatively below the gearing limit of 60 per cent prescribed by the Securities Commission.
"We maintain our forecast pending completion of the acquisition," HLIB said.
HLIB has maintained its "Buy" call on Axis Reit with an unchanged target price of RM2.54.