Axis Real Estate Investment Trust
(April 21, RM2)
Outperform at RM2, target price RM2.30: We recommend Axis REIT as an outperform with our target price at RM2.30 based on a 5% discount using discounted cash flow (DCF) valuation.
We believe there is room for potential re-rating to our fair value given that Axis REIT has four properties in the pipeline namely Axis Technology Centre and Axis Techpoint 1 in PJ, Axis SADC 2&3 in Shah Alam and Axis PDI Centre in Klang which has not been imputed into our valuation.
Axis REIT is also looking at acquiring office buildings in Cyberjaya, factory/warehouse in Puchong and a logistic warehouse in Johor. We believe Axis REIT will embark on its expansion plan with acquisition of the said properties through bank borrowings and share placement sometime this year.
Annualising 1QFY10 gross rental income of RM19.79 million comes to RM79.16 million, accounting for 94% of our FY10 forecast. Nonetheless, our forecast had factored in future revenue from Quattro West (former Nestle House), Shah Alam DC1 (SADC1) and rental reversion of existing properties. Quattro West had successfully leased out 84% of the space commencing 2H10 following the refurbishment in 2009.
SADC 1 had secured new tenancies for a period of 11 years commencing end-March 2010 at 8% rental reversion. Axis REIT management had also renegotiated 451,868 sq ft of space, which represents approximately 54% of their total lettable space due for renewals.
The increase in gross rental income was due to additional rental contribution from newly acquired properties - two Seberang Perai logistic warehouses, which were completed in March, and a Bukit Raja distribution centre that was completed in mid-December 2009.
Axis-REIT has made a provision of RM11.36 million for income distribution for the first quarter ended March 31, 2010, which is approximately 95.5% of its realised income before tax in respect of the period from Jan 1, 2010 to March 31, 2010 and the brought forward undistributed retained earnings as at Jan 1, 2010. This leaves its undistributed realised income before taxation at RM530,000.
Axis expects to complete the acquisition of PTP D, Johor that comprises a warehouse and two-storey office buildings in October 2010. The purchase consideration of RM30 million is at a 3.23% discount to the market value providing unitholders with a net capital gain of approximately RM500,000.
The acquisition will be funded via bank borrowings, which will raise Axis REIT's gearing level to 37.49% from the current 35.43%. - Inter-Pacific Research, April 21
This article appeared in The Edge Financial Daily, April 16, 2010.
(April 21, RM2)
Outperform at RM2, target price RM2.30: We recommend Axis REIT as an outperform with our target price at RM2.30 based on a 5% discount using discounted cash flow (DCF) valuation.
We believe there is room for potential re-rating to our fair value given that Axis REIT has four properties in the pipeline namely Axis Technology Centre and Axis Techpoint 1 in PJ, Axis SADC 2&3 in Shah Alam and Axis PDI Centre in Klang which has not been imputed into our valuation.
Axis REIT is also looking at acquiring office buildings in Cyberjaya, factory/warehouse in Puchong and a logistic warehouse in Johor. We believe Axis REIT will embark on its expansion plan with acquisition of the said properties through bank borrowings and share placement sometime this year.
Annualising 1QFY10 gross rental income of RM19.79 million comes to RM79.16 million, accounting for 94% of our FY10 forecast. Nonetheless, our forecast had factored in future revenue from Quattro West (former Nestle House), Shah Alam DC1 (SADC1) and rental reversion of existing properties. Quattro West had successfully leased out 84% of the space commencing 2H10 following the refurbishment in 2009.
SADC 1 had secured new tenancies for a period of 11 years commencing end-March 2010 at 8% rental reversion. Axis REIT management had also renegotiated 451,868 sq ft of space, which represents approximately 54% of their total lettable space due for renewals.
The increase in gross rental income was due to additional rental contribution from newly acquired properties - two Seberang Perai logistic warehouses, which were completed in March, and a Bukit Raja distribution centre that was completed in mid-December 2009.
Axis-REIT has made a provision of RM11.36 million for income distribution for the first quarter ended March 31, 2010, which is approximately 95.5% of its realised income before tax in respect of the period from Jan 1, 2010 to March 31, 2010 and the brought forward undistributed retained earnings as at Jan 1, 2010. This leaves its undistributed realised income before taxation at RM530,000.
Axis expects to complete the acquisition of PTP D, Johor that comprises a warehouse and two-storey office buildings in October 2010. The purchase consideration of RM30 million is at a 3.23% discount to the market value providing unitholders with a net capital gain of approximately RM500,000.
The acquisition will be funded via bank borrowings, which will raise Axis REIT's gearing level to 37.49% from the current 35.43%. - Inter-Pacific Research, April 21
This article appeared in The Edge Financial Daily, April 16, 2010.
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