Axis Real Estate Investment Trust : Kenanga: Axis REIT may sell more assets

12/30/2013 | 11:55pm US/Eastern

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KUALA LUMPUR: Axis REIT Managers Bhd may sell more assets at the expense of making acquisitions next year, a research firm said.
Axis REIT last week announced that it is selling Axis Plaza for RM34 million.
Kenanga Research feels there could be other disposals.
"Axis REIT has a total of RM225 million revaluation gains across all its assets, and we believe asset acquisitions in financial year 2014 may be tough due to the low-cap rate environment," the firm said.
The RM34 million is at a slight premium to the appraised value of Axis Plaza of RM32 million, Kenanga Research said. This gives a net disposal gain of RM11 million versus the investment cost of RM22.5 million and estimated disposal expense of RM500,000.
The disposal is to realise the value of the asset under Axis REIT's value enhancement efforts as it has fully matured, the firm said, adding thatAxis Plaza had previously recorded below average occupancy rates of 89 per cent.
"The intention to trade assets is well within the company's strategy of managing a property trading portfolio," Kenanga Research said.
The firm said Axis REIT unitholders can look forward to the potential distribution of RM11 million net gains, which work out to 2.35 sen per share.
The remaining RM23 million proceeds from the disposal will be used to pare down borrowings to allow for new gearing headroom for new asset enhancement initiatives and potential new acquisitions.
Kenanga Research expects Axis REIT's gearing next year to reduce marginally to 0.35 from 0.36 time after the exercise.
The firm has also increased its financial year 2014 realised net income and distribution per unit by more than 11 per cent each to RM104.8 million and 22.8 sen, respectively, to take into account the exercise.© Al Bawaba Ltd., Acquiremedia 2013

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