KUALA LUMPUR: Axis REIT is anticipated to continue its investment in asset enhancement initiatives (AEIs) for existing assets as it aims to achieve at least one green building certification per year.
Affin Hwang Capital stated in a note that priority will be given to assets contributing significantly to the group's revenue.
"However, this does not signify a pause in Axis REIT's portfolio expansion. With a substantial debt room of RM706.5 million as of financial year 2023 (FY23), the company would remain open to asset injections into its pipeline, albeit with a high priority on ESG considerations, in our view.
"Aside from Axis REIT's annual asset acquisition activity, we foresee near-term earnings growth driven mainly by higher rental reversion rates post-AEIs, supported by an ESG premium for its green buildings," it said in a note.
To recap, Axis REIT's proposed acquisitions of Temerloh Mall in December 2023, which was completed in January 2024, Kawasan Perindustrian Sendayan Techvalley Seremban in October 2023, which is expected to be completed in the first half of 2024 (1H24) and the adjacent industrial building to Axis Facility 2 @ Bukit Raja in January 24, expected to be completed in the third quarter of 2024 (Q3 2024).
These acquisitions totaling RM122.8 million are to be entirely funded via Axis REIT's existing borrowings, which will increase its gearing ratio to 37.6 per cent, up by 3.2 percentage points year-on-year (YoY) but below the maximum gearing ratio threshold of 50 per cent.
"For our earnings assumptions, we forecast these acquisitions to contribute RM4 million–RM7.7 million of FY24-FY26 NPI," it said.
The firm maintained "Hold" on the stock with a higher target price of RM1.99.
At a 5.5 per cent 2024 estimated dividend yield, the research firm said Axis REIT is trading slightly above its past five-year average of 5.1 per cent.
