Axis REIT (AXREIT) has entered into 2 separate sale and purchase agreements to purchase the following properties from Cycle & Carriage Bintang Berhad(C&CB), details of which are as follows: (i) leasehold land together with all buildings erected thereon bearing postal address Lot 19, Jalan 51A/219, Federal Highway, 46100 Petaling Jaya, Selangor Darul Ehsan; and (ii) leasehold land together with all buildings erected thereon bearing postal address Lot 5, Jalan Perusahaan 1, Kawasan Perindustrian PKNS, 68100 Batu Caves, Selangor Darul Ehsan for a total lump sum consideration of RM125m. These assets are currently leased to C&CB under a 10-year lease with approximately 6.20% per annum gross yield with agreed step-up throughout the term of lease. The offer price for the assets is close to the latest market value which is around RM125m. The group intends to utilise financing facility of approximately RM125.0m from its existing credit lines which will increase its financing ratio to 36.1% of audited total assets as at 31 December 2023 which is below the gearing limit of 50% prescribed by the Securities Commission Malaysia. Pending deal completion which is expected by end-2024, we keep our earnings unchanged for now. Maintain Neutral call with DDM-derived TP unchanged at RM1.96.

• Property details. The proposed acquisition of the properties is in line withthe Fund’s investment objectives and its growth strategy to provide theunitholders with stable income distribution and to achieve growth in the netasset value per unit by acquiring high quality, earnings accretive propertieswith strong recurring rental income. We understand that both assets arelocated in prominent and established areas within Klang Valley. Property 1 iscurrently used as a 3S Service Centre and has an excellent exposure as ithas direct frontage on Federal Highway, making it one of the key landmarkswithin Petaling Jaya. Property 2 has very good accessibility from multiplemajor highways in Klang Valley and is located within 2.5 kilometres away from the main commercial centre of Taman Sri Gombak.

• Acquisition targets worth RM200m in the pipeline. As per the latestguidance, we understand that the Group is still looking to expand its assetportfolio with focus on Grade-A logistics facilities and manufacturing facilitieswith long leases from tenants with strong covenants. The assets targetedwill be well-located logistics warehousing in locations ideal for last-miledistribution. In addition, the Group is also looking at office, business parksand industrial properties with potential for future enhancement. During thequarter under review, the property portfolio size of AXREIT remains at 63properties as at 1QFY24 with total assets under management valued atRM4.59bn. It has signed 4 sale and purchase agreements so far worthabout RM450m.

Source: PublicInvest Research - 24 May 2024