AXREIT: Industrial REIT Bolsters Portfolio with Key Acquisition, Retains “BUY” Rating
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent industrial Real Estate Investment Trust (REIT) has announced its second strategic acquisition of 2025, an industrial facility located in Bandar Sultan Suleiman, Port Klang. This move underscores the REIT’s commitment to inorganic growth and its position as a robust proxy for the resilient industrial property sector. The acquisition is viewed positively, supported by the REIT’s healthy balance sheet and the current favourable interest rate environment, which provide ample room for further yield-accretive opportunities.
Strategic Acquisition Details
The REIT is acquiring the property, comprising a single-storey detached factory with annexed offices, a standalone office/canteen block, and a detached warehouse, for a total cash consideration of MYR50 million. The acquisition price is in line with the independent valuation of MYR50.3 million. This purchase, to be fully funded via bank borrowings, is expected to raise the REIT’s gearing from 32.7% (2Q25) to 33.6%, remaining comfortably below the 50% threshold and leaving an estimated debt headroom of MYR853 million post-acquisition. The transaction is projected to conclude by the first quarter of 2026.
The acquired asset, built between 1993 and 1998, boasts a combined Gross Floor Area (GFA) of 240,600 sq ft on a 9.0-acre leasehold site with a lease expiring in 2104. Its strategic location, close to North Port and major highway connectivity, is a key advantage for future leasing.
Outlook and Considerations
Analysts consider the acquisition mildly positive, noting its relatively small scale (approximately 1% of total assets) and its alignment with the REIT’s growth strategy. The property, once leased, is anticipated to deliver a gross yield of 7% based on prevailing rental benchmarks of approximately MYR1.50 per square foot per month. The REIT’s healthy balance sheet and the current favourable interest rate environment are seen as providing ample scope for further yield-accretive acquisitions.
A primary challenge identified is the property’s current vacant status, which introduces a risk of delayed income contributions. Unlike some of the REIT’s prior acquisitions that included sale-and-leaseback arrangements, this property requires new tenants. However, given its strategic location and long land tenure, leasing prospects are considered reasonable.
Recommendation
Investment bank TA SECURITIES has maintained its “BUY” recommendation for the REIT, reaffirming its positive outlook. The target price for the stock is set at RM0.25, representing a potential upside of 25.0% from its last traded price of RM0.20. Earnings forecasts and the target price are currently maintained, pending the full completion of the acquisition.
