KUALA LUMPUR (Oct 6): Longer-term financing secured much earlier is now providing Axis REIT (KL:AXREIT) cushion against rising interest rates as the real estate investment trust pursues deals, an analyst said.
A 25-basis-point increase in policy rate would potentially raise its cost of borrowings by just 0.1 percentage-point to 4.06%, Maybank Investment Bank said, noting that Axis REIT has locked in 10-year and seven-year financing facilities over the past 12 months when rates were more favourable.
“With the completion of signed acquisitions, gearing is expected to rise to around 39%, still having ample headroom before any equity raising is required,” the research house said.
Axis REIT owns and manages more than 70 office and industrial assets worth over RM5 billion in Klang Valley, Penang, Johor, Pahang, Negeri Sembilan and Kedah. The trust is in the midst of acquiring a distribution centre, a warehouse, and an industrial complex for RM193 million combined.
The stated aim is to nearly double the asset under management to RM10 billion by 2030, driven by high-growth sectors and key industrial hubs throughout Peninsular Malaysia.
In the near term, Axis REIT has a RM250 million acquisition pipeline currently under negotiation, of which one or two transactions could be announced before year-end, Maybank Investment said and maintained its “buy” call on the trust.
“We believe its acquisition pipeline should provide further income visibility” with most ongoing transactions fully occupied and carrying weighted average lease expiry of five years or longer, the research house said.
Axis REIT has rebounded from its September lows when the US Federal Reserve raised interest rates for the first time in three years, sending global bond yields higher and triggering concerns of rising borrowing costs.
Still, 10 out of 12 research houses tracked by Bloomberg recommend investors to “buy” Axis REIT and two are on “hold” calls. The average target price is RM2.22, a potential gain of up to 21% in the next 12 months from current price of RM1.84.