a-iTrust – DBS

Underlying Portfolio Strength

• Results were in line with estimates
• Secured income base
• Acquisition possibilities present upside surprise
• Upgrade to BUY, TP S$0.65 based on DDM

Results in line. Ascendas India Trust (AiT) reported 4Q09 results in line with our expectations. Gross revenues and NPI grew by 13% and 8% to S$17.4m and S$16.1m respectively. Growth was driven by (i) income contribution from Crest, (ii) positive rental reversions, (iii) higher operations and maintenance income. Distributable income came in 25% higher to 15.6m, translating to a DPU of 2.05 cts. For FY09, AiT delivered a DPU of 7.54 Scts, translating to a yield of 15%.

As of 31st March’09. AiT recorded a 5% devaluation on its properties. This was a result of more conservative cap rates used by valuers. NAV declined to S$0.89 as a result.

Secured income base. Looking ahead, AiT has only 13% of its NLA up for renewal in FY10, we believe that AiT should be able to keep occupancies relatively stable given (i) each tenant accounted for <4% (ii) strong retention rate of 89% for expiring leases in FY09.

Headroom for growth. Potential upside surprise will come from its ROFR from Ascendas Land Int’l & Ascendas India Devt Fund, which are not currently factored in our models. Current gearing of 9% presents headroom of S$220m before reaching 35% gearing.

Upgrade to BUY, TP $0.65. At current levels, AiT presents attractive value for investors looking to leverage on the mid-long term growth prospects of India’s IT parks space while receiving a FY10-11 DPU yield of 12-14%. Upgrade to BUY, TP S$0.65 based on lower cost of equity assumptions (CE of 15%), in line our DBSV economist view of a bottoming of India’s economy in 1H09.