27/01/2025

BIZ & FINANCE MONDAY | JAN 27, 2025

/thesuntelegram FOLLOW / Malaysian Paper

ON TELEGRAM m RAM

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Axis-REIT mulls acquiring data centre assets

Malaysia stands to benefit from Trump’s trade policies: KSI-ECKL analysis KUALA LUMPUR: Malaysia is poised to seize significant opportunities from Donald Trump’s return as president of the United States, especially in attracting foreign direct investment (FDI) and enhancing export potential, according to an analysis by the KSI Strategic Institute for Asia Pacific and the Economic Club of Kuala Lumpur (ECKL). In a joint statement, KSI and ECKL said that with Trump’s plan to impose 10% tariff on Chinese goods from Feb 1, companies seeking to shift production lines to other countries may turn to Malaysia. “For Malaysia, a key exporter of electronic products and components to the US, such measures could impact export com petitiveness. “However, as companies seek to diversify supply chains away from China, Malaysia’s semiconductor industry, which holds about 13% of the global market in chip packaging and testing, may attract increased investment,” they said. According to the statement, the inten sification of US-China trade tensions under Trump’s policies is expected to accelerate the “China Plus One” strategy, where companies diversify their manufacturing bases outside China. “Malaysia stands to benefit from this shift, potentially seeing an increase in FDI, particularly in the electronics, machinery, and palm oil sectors. This influx could contribute an additional RM19.7 billion to Malaysia’s gross domestic product over four years, equivalent to a one per cent increase,” it said. The statement also highlighted the potential impact of Trump’s energy policies, noting that his support for the traditional energy sectors, including fossil fuels, may lead to increased US production and exports. “For Malaysia, a net oil exporter, this could result in lower global energy prices, affecting revenue from mineral fuel exports,” it cautioned. However, it said, Malaysian petroleum companies could find new opportunities if the US reduces renewable energy in centives, which may result in increased demand for traditional energy sources. KSI and ECKL said Trump’s return to the White House may also pose challenges that require vigilant and proactive policy responses to safeguard economic stability. They cited Malaysia’s domestic strengths, which include a diversified economy, strategic global position, robust infra structure, skilled workforce, and strong financial systems. “Policymakers should capitalise on these strengths by diversifying trade partnerships, attracting FDI, enhancing digitalisation, and building resilience in key sectors. “By taking proactive measures, Malaysia can mitigate the potential impacts of Trump’s policies and maintain steady economic growth,” they said. KSI and ECKL said the combination of US tariffs and China’s domestic economic challenges is expected to weigh on Malaysia’s economy, particularly in the export-driven manufacturing and electrical and electronics sectors. Despite the challenges, Malaysia’s strategic positioning and economic fundamentals pro vide a buffer against the worst effects, the two institutions concluded in their report. – Bernama

with an additional 1.8 million sq ft of space under management and a positive rental reversion rate of 5.3%. As of the end of 2024, Axis-REIT’s portfolio comprised 69 properties with a nationwide presence across Malaysia, including 56 properties operating at full occupancy.

Distribution Centre (Phase 2), and positive rental reversion across its portfolio. Considering the fair value adjustment on the portfolio during the year, net income before tax decreased to RM212.5 million in FY24 compared to RM221.6 million in FY23. This was due to a lower gain in fair value of investment properties. The gain in fair value in FY24 was RM49.4 million, in contrast to RM81.3 million in FY23.

o Real estate investment trust registers income of RM320.1 million in FY24, up 12% year-on-year

A good example of a non-tax benefit which is rarely considered is investments located in remote areas which bring in new infrastructure that will also benefit the community at large in that area which otherwise might not have been forthcoming. The social and economic effect of that infrastructure should not be ignored. Another important ripple effect of new investments is the upskilling of the workforce. Incentives are also extremely useful for reducing the financial risks for local companies investing in new technology and products, which will make them more competitive and dynamic especially in a fast-changing world. This will also encourage innovation, parti cularly if incentives are given for research and development activities. A proper cost benefit analysis taking into account quantitative and qualitative factors should be considered and, in many cases, it will show that providing the benefit and attracting the investments will outweigh the tax forgone. It must be remembered that attracting such investments is an addition to the economy which did not exist in the past and, therefore, there is no loss to the government. This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com). The company’s total assets under management stood at RM5.26 billion, covering 15.15 million sq ft of space. Its financing ratio was 33.3%. The portfolio boasts a solid industrial space segment with an overall occupancy rate of 95% and a weighted average lease expiry of 4.9 years. Axis-REIT’s 69 properties are strategically located in prime industrial areas, including the Klang Valley, Johor, Penang, Pahang, Negeri Sembilan and Kedah. The geographical diversification is designed to capitalise on the rapid growth of existing and emerging regional industrial hubs. Reclassified as an Islamic REIT in 2008, Axis-REIT recorded a year-to-date distri bution per unit of 9.27 sen in 2024 and achieved a market capitalisation of RM3.5 billion. Kenanga Investment Bank Bhd, in a report, said Axis-REIT’s ongoing proposed acqui sitions that have been progressively completed in FY24 will continue to support its FY25 earnings growth prospects. It said Axis REIT acquired more than RM500 million worth of assets in FY24, which is higher than its average historical acquisition record. “Having said that, given the fact that industrial assets are now experiencing yield compression due to landlords raising asset prices at a pace faster than the rate of rental reversions, we do not foresee Axis-REIT continue acquiring assets in FY25 as aggressively as it did in FY24,” it added.

Ű BY JOHN GILBERT sunbiz@thesundaily.com

attract foreign direct investments. Even developed economies such as Europe and America provide incentives to attract investments by providing tax breaks or cash grants. Emerging markets do not have the capacity to give grants, and they are confined to providing tax breaks. Being in a competitive world, Malaysia cannot avoid giving tax incentives because our neighbours also compete for similar investments by providing equal or better incentives. When investors decide on Malaysia, they base their decisions on a multitude of factors. Inevitably, tax incentives are one of the key factors they will compare against that of our neighbours. Since capital is mobile, Malaysian private investors, too, will look at the availability of incentives although they are likely to be biased towards Malaysia since their home is in Malaysia and they are based here. However, in maximising the return on capital, whether they are foreign investors or local investors, the weightage given to the sentimentality of their home base is negligible because they are looking for maximum returns for their shareholders and stakeholders. Government concern The government, however, is always concerned about the potential loss of taxes due to the avail ability of incentives as it will negatively impact KUALA LUMPUR: Axis Real Estate Investment Trust (Axis-REIT) is exploring the acquisition of assets specifically for data centres in addition to its traditional focus on industrial assets. CEO and executive director Leong Kit May ( pic ) said the company has been looking into the country’s data centre market and develop ment. “The data centre business and operations are different from our industrial assets, as there are various factors to be considered, such as electricity, utilities, type of data centres like Tier 1 or Tier 2, and other factors. “The capitalisation rate for data centres, which represents the ratio of net operating income to asset value, stands at approxi mately 6% to 7%. So we have to make the right decision before acquiring any assets for data centres,” she told reporters and analysts at a briefing on Axis-REIT’s financial results on Friday. For the financial year ended Dec 31, 2024 (FY24), Axis-REIT achieved a total trust income of RM320.1 million, reflecting a 12% year-on-year growth, while net trust income amounted to RM212.5 million. This growth was primarily driven by contributions from newly acquired pro perties, new tenancies at Axis Mega

they are willing to understand that, in the long run, there will be a pay-off which will outweigh the taxes for gone. This will come in the form of providing new employment, which will have a multiplier effect on the economy due to the increased consumer spending. The whole supply chain that will support the new investment (such as local suppliers through logistics, materials, consumables, professional and financial services, etc) will be an additional contribution to the economy. Incentives bring in additional taxes Tax breaks provided to new investments are not a loss to the country. At times, there will be addi tional taxes which outweigh the incentives given to the investor. Everybody engaged with the investor will pay taxes. Employees, suppliers, professional advisors and service providers, financial institutions providing financial products will pay their share of taxes when there are For Q4’24, Axis-REIT reported a total trust income of RM87.8 million, representing a 16% increase from RM75.6 million in the same quarter last year. Net trust income was RM93.5 million, reflecting a resilient portfolio performance. “We closed FY24 on a strong note. The strategic acquisitions completed during the year and the stable performance of our existing properties reflect our focus on delivering sustainable returns to our unitholders. As we look ahead to 2025, we remain optimistic and focused on pursuing accretive opportunities in high-quality assets to ensure consistent value creation,” Leong said. In Q4’24, Axis-REIT achieved significant milestones, including the acquisition of Axis Facility 3 @ Bukit Raja, Selangor, for RM313 million on Oct 8. The company acquired Axis Facility 1 @ Pulau Indah, Selangor, for RM110.08 million on Oct 11, and Axis Facility 2 @ Pulau Indah, Selangor, for RM48.57 million on Nov 26. Additionally, Axis Steel Centre @ SiLC, Johor’s disposal for RM162 million was completed on Dec 12. By Dec 31, 2024, the portfolio size had expanded by seven properties to a total of 69,

Providing incentives doesn’t mean a loss for the govt MOST countries, especially emerging markets, have used tax incentives to the federal budget. The concern may be valid, but it becomes redundant once economy through the additional spending by all the stakeholders involved or connected with the new investment.

transactions with the new investor. Benefits outweigh the loss of taxes

It is important for the authorities to carry out a proper cost benefit analysis. The benefits should not only include the taxes collected from the employees and suppliers but should also con sider the multiplier effect it will have on the