| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.80 (+29.0%) |
| Last Traded | RM0.62 |
| Recommendation |
A major player in the Malaysian property market has embarked on a strategic industrial expansion, committing to the forward purchase of five high-specification industrial facilities in Iskandar Puteri, Johor. This move, valued at RM220.8 million, represents 4.2% of the entity’s total asset value and is expected to significantly bolster its industrial and logistics portfolio.
The acquisition, funded entirely through bank borrowings with 10% payable upfront, involves five single-storey detached factories with annexed double-storey office components, offering a combined built-up area of 524,077 sq ft on freehold industrial land. These facilities, currently under development, are designed as move-in-ready assets with high floor loading capacity, generous ceiling heights, and modern infrastructure to cater to advanced manufacturing, logistics, and technology-related users.
Strategic Rationale and Valuation
Analysts note that while the implied acquisition cost of approximately RM421 per square foot is meaningfully higher than previous industrial acquisitions in Johor, this premium reflects elevated land prices, construction costs, and the assets’ strategic proximity to the Tuas Checkpoint. The investment bank views the acquisition as a move that strengthens the entity’s medium-term industrial exposure and enhances income diversification.
Execution Risks and Challenges
Despite the strategic merits, the transaction carries execution risks. The absence of pre-committed tenants means the entity will bear full leasing risk, with meaningful income contribution only anticipated from FY27 onwards. The implied monthly rental of RM2.60 psf, while achievable, sits at the upper end of prevailing market levels. As such, successful leasing execution, optimal tenant mix, and competitive positioning will be crucial, particularly given the staggered completion from 1H27 to 1H28, which could coincide with increased industrial supply.
Long-term Outlook and Financial Impact
Upon completion, the industrial and logistics segment is projected to increase from 18% to 26% of the total Net Lettable Area (NLA), equivalent to approximately 5.3 million sq ft. On an asset under management (AUM) basis, this segment is expected to rise from 7.9% to 11.5%, moving closer to management’s target of growing the Logistics & Industrial segment to ~20% of portfolio AUM by 2028. Gearing is expected to rise from 39.8% to around 42.2% but will remain comfortably within regulatory limits. The acquisition could provide up to a 3% uplift to FY27 earnings forecasts, assuming a 90% NPI margin and full occupancy, though current forecasts are maintained pending transaction completion.
Analyst Recommendation
TA Securities has reiterated its Buy recommendation on the entity, maintaining an unchanged target price of RM0.80. The recommendation is based on a target yield of 6.75% and incorporates a 3% ESG premium, reflecting confidence in the long-term returns driven primarily by successful leasing execution.
