KUALA LUMPUR (Feb 20): Hektar REIT’s recent acquisition of a light industrial asset is yield accretive, with an expected 7.5% return, said Hong Leong Investment Bank (HLIB). 

According to HLIB, this outperforms Hektar REIT’s current net property income (NPI) yield of 5.5%-6.0%, further enhancing its overall portfolio returns.

“This marks its maiden expansion into the industrial sector, to reduce reliance on its retail business,” said HLIB. 

This deal is expected to lift the REIT’s distribution income by 2.2% in FY2025, and 4.3% in FY2026. HLIB believes its gearing ratio will edge up slightly to 42.8% from 42.2%, as the acquisition is financed through 70% debt and 30% cash.

With this latest acquisition, Hektar REIT’s portfolio will expand to eight properties, following its RM148.5 million purchase of an educational asset last year. The deal is set for completion in the second half of 2025.

However, concerns remain over tenancy expiry risks in the retail segment, with a significant portion of net lettable area (NLA) set to end in the coming years, HLIB added.

HLIB upgraded the stock to “hold”, with a target price of 48 sen, recognising its diversification efforts, while balancing risks in its retail portfolio.

At the time of writing on Thursday, shares of Hektar REIT traded at 53 sen , valuing the company at RM372 million.