a-iTrust – DBSV

Strong S$ continues to undermine true Performance

At a Glance

• 2Q12 results an improvement but strong S$ erodes performance

• Stronger growth from 2H12

• Maintain BUY, TP adjusted to S$0.98

Comment on Results

2Q12 an improvement, but strong S$ continues to erode performance. Ascendas India Trust’s (a-itrust) operational performance in INR terms remains robust, with topline growing by 17% y-o-y. However, the strong S$-INR, which appreciated 10% since a year ago, led to reported topline growth of only 6% to S$31.4m, mainly from the rental income from their new buildings (Zenith and Voyager) which are still ramping up. Net property income (NPI) of S$18.4m grew by a lower 2% y-o-y, due to an increased portfolio size offset by higher electricity tariff & fuel costs. Distributable income however shrank by 9% y-o-y to S$11.8m, from a stronger S$ and higher interest costs from financing of its development activities, translating to a DPU of 1.54 Scts. Compared to 1Q12, results improved with DPU 3% higher. 1H12 performance formed 45% of our full year forecasts.

Development projects, completion of Hi-Tech City acquisition to underpin a stronger 2H12 performance. While performance fell short of our expectations YTD, we see strong earnings growth potential in the coming quarters with (i) strong take-up at Zenith, Park Square ad Voyager, with YTD occupancies of close to 79-83% but these have yet to fully contribute to earnings as tenants are undergoing fit-outs; and (ii) the expected completion of the acquisition of 2 operating buildings at aVance Business Hub by end of 2011.

Recommendation

BUY with revised TP of S$0.98. We have trimmed our FY12-13 numbers by 4% to 6% and lowered our TP by 7% in view of the stronger S$ and later than expected contribution from its new buildings. While a strong S$ continues to remain a drag on earnings in the near term, a-itrust ‘s has plenty of opportunities to grow, apart from acquisition and development plans already in place. Earnings upside hinges on its execution of acquisition & development pipelines – from both 3rd parties and its sponsor, which we have not factored in.