Yield accretive assets to drive Axis REIT growth
KUCHING: Axis Real Estate Investment Trust (Axis REIT) growth prospects will be driven by yield- accretive asset acquisition this year.
Analysts remain confident that the property trust will be able to boost its income through more rental received from quality assets acquired and higher rental received from rental revision from its current properties.
The research arm of Affin Investment Bank Bhd (Affin Research) in a report said Axis REIT is currently in negotiation to acquire five highly yield-accretive properties worth RM380 million at a potential rate of seven to eight per cent and approximately 1.5 million square feet in gross floor area.
The research firm observed that despite rising property overheads and incoming supply of 15.4 million square feet of gross floor area in the Klang Valley from 2014 to 2016, it believed that the commercial real estate sector is still a landlord’s market (seller’s market).
Additionally, Affin Research said given Axis REIT prudent management, it will be able to withstand market competition through asset enhancement initiatives from its Section 19 Annex Building in Petaling Jaya, Selangor to improve rental rates and tenancy profi le as well as the possibility of a potential 10 per cent rental revision to be partly supported by 1.74 million square feet of net lettable area ( NLA) up for renewal in fi nancial year 2014 (FY14).
Meanwhile, the research division of Kenanga Investment Bank Bhd ( Kenanga Research) in a report said the property trust could be acquiring an asset in the near future as the company has yet to complete its share placement exercise which they are seeking shareholders’ approval during its upcoming annual general meeting on April 29.
The research firm observed that the property trust company typically acquires assets shortly after a disposal.
It noted that Axis REIT had in December last year disposed off Axis Plaza to Collective Developers Sdn Bhd for RM34 million cash.
Furthermore, the research arm of CIMB Investment Bank Bhd (CIMB Research) said Axis REIT is expected to renegotiate some 34.3 per cent of its overall NLA, with notable properties such as Axis Business Park, Axis Steel Centre and SPLC3 up for revision.
Aside from rental revision, CIMB Research also agreed with the views of Affi n Research and Kenanga Research that the property trust is in negotiation to acquire more properties.
For the first quarter of 2014 (1Q14), Axis REIT in a filing to Bursa Malaysia on April 21 said its net income improved by 7.3 per cent year- on-year ( y- o-y) to RM22.39 million.
At the same time, the property trust said its turnover increased 1.7 per cent y- o-y to RM35.60 million.
Analysts noted that the higher turnover achieved was a result of higher rental revision collected as Axis REIT has managed to negotiate 378,937 square feet of NLA and achieved 8.87 per cent of positive reversion.
They observed that the property trust posted higher net property income due to an one- off recognition of RM10.95 million arising from the gain for the disposal of Axis Plaza which was completed in March this year.