Axis upbeat on Penang land

PETALING JAYA: Axis REIT Managers Bhd's recent acquisition of real estate in Seberang Prai will give it a gross yield of 11% and a net yield of 10.2%, said chief executive officer and executive director Stewart LaBrooy.

He said while Axis gearing levels would rise to 39% after this deal, they would come down to 26% by year-end when the company's proposed placement of 75.1 million units was completed. This will help the company raise RM180mil.

“We are bullish about Penang now and will be making more investments in the north,” he said, noting that the rapid industrial development in Penang was a draw for the REIT.

Axis is paying RM59mil for a logistics industrial building facility built on two parcels of adjoining industrial land in Bukit Tengah Industrial Park. They have leasehold titles that expire in 2052 and 2068.

LaBrooy said the purchase price of RM59mil was a net gain as the total market value of the property was RM62mil according to independent valuer CB Richard Ellis.

For the facility, the REIT will inherit the tenancy of Schenker Logistics (M) Sdn Bhd, a global logistics service provider. The tenancy which expires in mid-2014, will generate RM573,076 in monthly rentals or RM6.88mil in gross annual income.

The 408,250-sq-ft property is the fourth investment in the north and the 28th property secured by Axis which invests mainly in Penang, the Klang Valley and Johor. It will increase the REIT's asset under management to over RM1.33bil.

Analysts have said the acquisition is no surprise because the company has aimed to increase its total investment properties to RM1.5bil by year-end from its current RM1.25bil.

On its stock price, an analyst from RHB Research said that Axis was doing better than other REITs.

“We are still positive on the stock. Even near 40%, its gearing ratio is still considered manageable and the company will pare down its debt with the planned placement,” he said.

He added that while the market had been affected by the recent economic turmoil, Axis had been “fairly resilient and its valuation was still supported by strong yields, which have historically remained between 7% and 10%”.

Axis shares closed at RM2.35 yesterday, 1 sen lower from Wednesday.

HwangDBS Vickers Research said that if Axis completed its acquisition by October, it would enjoy a RM1.7mil gross revenue this financial year (FY11) and RM6.9mil in FY12 from the property.

By The Star