a-iTrust – DBS

Facing headwinds

Ascendas India Trust (AiT) delivered a 3Q09 DPU of 2.02 Scts on the back of continued strong portfolio performance. Looking ahead, AiT faces a deteriorating business environment, which could translate to softer demand for space at its various IT tech parks. As such, we maintain HOLD, TP $0.53 based on DDM. AiT current trades at a FY09-11 yield of c. 12-15%

Results in line. AiT’s 3Q09 gross revenues and net property income continued to remain firm at S$28.7m and S$17.0 m respectively (+ 7% yoy and + 9% yoy), backed by continued strong portfolio occupancies and contributions from The Crest and Vega. Net profit, however, was slightly ahead at S$15.5m, due to a slower than expected drawdown of their construction loan. As a result, distributable income was also slightly ahead at S$15.3m for 3Q08 (+36% y-o-y, 10% q-o-q), translating to a DPU of 2.02 Scts for the quarter. NAV currently stands at S$0.99 with a gearing ratio of 9%.

Outlook remains challenging. While portfolio occupancies have remained stable at c.98% till date, we anticipate demand for IT outsourcing services to weaken on the back of new supply and down-sizing activities at various MNCs, which form a major proportion of AiT’s tenant base. We estimate occupancy levels to decline 5- 10% over FY09-10.

Moderating DPU estimates. We lower FY10 DPU estimate by c.9% to take into account (i) increased vacancies (5%-10%) at the various tech parks, (ii) lower SGD-INR exchange rates (assumed @ 1SGD=30 INR) due to expiry of currency forward in March’09, offset by (iii) earning contributions from completing buildings from FY11 onwards compared to FY10-11 previously.