a-iTrust – DBS

Small but still beautiful

Story: Ascendas India Trust (AiT) announced that they have entered into a sale deed to acquire 96,051.88 sqft of office space in ITPB from Tata Consultancy Services (TCS) for a consideration of Rs 307.8m (S$9.8m). This space has been leased back to TCS concurrently.

Point: The completion of the sale will increase AiT’s ITPB space by 6% to 1.8m sq ft and 2% to its total portfolio. The acquisition is to be funded by debt ( SOR + 70 bps) and is expected to be immediately accretive to current unitholders when completed. As such, we have adjusted our forward DPU estimates in FY09 and FY10 by 0.5% and 1.4% respectively to 6.9cts and 7.7 cts. Moving forward, AiT is currently engaged in the development of 1.5m sqft of SBA (3 buildings) in ITPB and ITPC. Apart form this, further upward earnings surprise hinges on the execution of its (i) two ROFR with Ascendas Land Int and Ascendas India Devt Trust, (ii) 3rd party acquisition opportunities, and (iii) further development of 2.7m sqft SEZ in Bangalore. The above has not been factored in our forecasts.

Relevance: Maintain BUY, TP adjusted to S$0.91 (Previously $1.01). We have chosen to value AiT based on its existing asset portfolio & planned developments, removing valuation attributed to AiT’s future development of its 2.7m sqft SEZ in Bangalore (+S$0.10). AiT is currently trading at a FY09-10 DPU yield of 9.4% – 10.5%. Key risk to our forecast will derive mainly from execution delays from the development of its 1.5m sqft of SBA.