a-iTrust – DBSV

Loss in translation

At a Glance

• Strong underlying results in 3Q12, forming 72% of full year forecasts

• New developments seeing robust pre-commitments; quarters ahead to record incremental growth

• Maintain BUY, TP of S$0.87 maintained

Comment on Results

16% appreciation of S$ against INR eroded topline growth to a mere 2% y-o-y. Ascendas India Trust’s (a-itrust) reported revenue and net property income (NPI) of S$30.6m (+2% y-o-y) and S$17.5m (+3% y-o-y). In INR terms, underlying operational performance was robust, with topline/NPI each growing by 19% yo-y to INR 1.23bn/INR 0.7bn. Progressive recognition of rental income from new buildings (Zenith, Park Square ad Voyager) was the major contributor. Organically, a-itrust’s portfolio has exhibited resilience with occupancy remaining a healthy 95% supported by strong tenant retention rates of c79%, while renewals remained stable. Distributable income was lower by 12%% y-o-y to S$11.6m (DPU of 1.5 Scts), due to a stronger S$ and higher interest expenses incurred for its developments. Compared to 2Q12, performance was relatively flat.

Park Square opened to a fanfare; Zenith/Voyager seeing positive take-ups. a-itrust officially launched Park Square in Dec11and lease commitments are strong at c.87% – with major anchors to start operations soon. Its other 2 office buildings – Zenith and Voyager – are seeing pre-commitments of 82-98% and should head towards full occupancy soon. Looking ahead, we expect stronger earnings growth as tenants complete their fit-outs in the ensuing months. In addition, we look forward to the impending completion of the two planned operating buildings at aVance Business Hub by March 12. All these point towards a stronger start to FY13. Post acquisition, gearing is estimated to head towards 29%, still comfortable in our view.

Recommendation

BUY with S$0.87 TP based on DDM. While management continues to execute strongly, the strong S$ continues to undermine its ‘true operating performance’. The recent strengthening of the INR-S$, if sustained, should be a bright spot for 4Q results. a-itrust offers attractive FY12-13F prospective yields of 9.5-9.8%.