a-iTrust – DBS

1QFY09 results in line

Story: Ascendas India Trust (AiT)’s 1QFY09 results were within expectation. Gross revenue and net property income grew 23% and 20% y-o-y to S$28.6m and S$16m respectively. Distribution income of S$12.4m, translates into 1.65 cts DPU.

Point: Gross revenues and NPI were boosted by (i) recently completed additions; Vega at The V and Crest at ITPC, and (ii) higher portfolio occupancy of 97% from new tenant sign-ups, and (iii) higher than average rentals secured for c. 150,000 sq ft of its space. Moving forward, AiT has lined up a further 1.5m sq ft of SBA to be constructed over the next two years. Taking into account a possible delay in rental contribution from these spaces, we lowered DPU by 20.6% for FY09F to 6.9 cts and by 22.6% for FY10F to 7.6 cts. This adjustment is due to a staggered rental contribution post completion of these buildings.

DPU growth will be largely organic in the near term, with 38% of its portfolio up for renewal in FY09-10. The development potential of 2.7m sq ft of SBA, largely within a SEZ in ITPB, should support portfolio growth in the medium term. In addition, its pipeline of two ROFR with Ascendas Land Int and Ascendas India Devt Trust could be catalysts for upward earnings surprise when executed.

Relevance: Our DDM-backed price target is reduced to S$1.01 to reflect a higher risk free rate of 3.9%, 10% risk premium and lower terminal growth rate of 1%. AiT is currently trading at attractive FY09F and FY10F yields of 8.5% and 9.4% respectively, and offers 26% upside to our price target. We continue to like AiT for its quality portfolio, and its 3-pronged growth strategy of (i) proposed development pipeline, (ii) development potential of a further 2.7m sqft of SBA and (iii) 2 ROFR with its sponsor