KUALA LUMPUR: Maybank Investment Bank Research is "mildly positive" on Axis REIT Bhd's proposal to lease about seven acres of vacant land in Subang, Selangor from Malaysia Airports Holdings Bhd.

The land, which MAHB is currently leasing from the Federal Land Commission, will be based on a 30+19 years tenure for a total consideration of RM19.9mil.

Axis proposed to construct a single-storey manufacturing plant-cum-office building on the land, for lease to Upeca Aerotech Sdn Bhd for a 20+6 years tenure.

The estimated initial development cost is RM74.2mil, which includes the RM19.9mil land lease cost. The handover date is targeted for Dec 15, 2018.

The leaseback has an initial rental of RM5.6mil per annum for the first three years and is subject to rental step-ups in later years. 

"We are in favour of the proposal as our estimated net property yield of 6.8% (assuming 90% net property margin) is above our estimated WACC of 5.0% (debt: equity 40:60)," said Maybank IB Research.

The research firm has increased its FY18/19 earnings estimate by -3.4%/+1.5% after imputing higher borrowings and the new asset's contribution.