AME REIT's proposed acquisition of Johor factories for RM119 mil is fair and reasonable, says independent adviser

• The independent adviser noted the RM119.45 million price tag represents a 2.1% discount, or RM2.55 million, to the properties' fair value of RM122 million.

KUALA LUMPUR (Oct 17): AME Real Estate Investment Trust's (KL:AMEREIT) proposed acquisition of four single-storey detached factories in Johor for RM119.45 million has been deemed fair and reasonable, according to independent adviser MainStreet Adviser Sdn Bhd.

“We are of the view that the rationale and benefits of the proposed acquisitions are reasonable considering the strategic location and development potential of the areas in which the subject properties are located,” MainStreet said in a circular to unitholders published by the REIT on Thursday.   

The independent adviser noted the RM119.45 million price tag represents a 2.1% discount, or RM2.55 million, to the properties' fair value of RM122 million. The terms of the sale and lease agreements are also deemed fair and not detrimental to non-interested unitholders, it said.

AME REIT is buying the four industrial properties from its 49.62% parent AME Elite Consortium Bhd (KL:AME) in an effort by the latter to realign its property investments.

The acquisitions are not expected to materially impact AME REIT's earnings and distributable income for the financial year ending March 31, 2025 (FY2025), but MainStreet anticipated it will contribute positively to the future earnings instead.

MainStreet said that pre-agreed rental reversions under long-term leases and active asset management strategies should boost future earnings, earnings per share, and distributions per unit for AME REIT.

Further, the independent adviser noted AME REIT’s net asset value per unit would remain unchanged upon completion of the acquisitions, assuming the deal had taken place as of March 31, 2024.

However, the gearing ratio is expected to rise from 0.15 times to 0.27 times, as the acquisitions will be funded through Islamic financing.

MainStreet also noted the overall prospects of the acquired properties will be supported by the positive outlook of the Malaysian economy, coupled with growing property demand and the strategic location of the factories in Iskandar Malaysia with strong logistical infrastructure.

In July, AME REIT inked separate sale and purchase agreements with AME Elite Consortium's subsidiary Pentagon Land Sdn Bhd and its 80%-owned subsidiary Ipark Development Sdn Bhd for proposed acquisition.

AME Elite said in a separate filing on Thursday that its independent adviser cfSolutions Sdn Bhd has deemed the disposal of the industrial properties as fair and reasonable, and not detrimental to the non-interest shareholders of the group.

cfSolutions said the proposed disposal represents an opportunity for the company to channel its resources towards ongoing and future property development and investment projects.

The four properties involved — two located in i-TechValley in Iskandar Puteri and two in i-Park@Senai Airport City — have a combined agreed lettable area of 391,872 sq ft.

"We believed the proposed disposal will contribute positively to the long-term prospect of the group," the independent adviser added.

Shares in AME Elite settled one sen or 0.61% higher at RM1.64 on Thursday, valuing the company at RM1.05 billion. Year-to-date, the stock has slipped 1.8%.

Meanwhile, AME REIT’s units closed unchanged at RM1.43, valuing it at RM752.71 million. Year-to-date, the stock has gained 10%.

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