a-iTrust – DBS

Simply Outstanding

• Results above expectations
• Attractive growth pipeline – 35% portfolio NLA growth over 2 years
• Buy for strong growth prospects, TP S$1.03

Results above expectations. Gross revenues were in line with expectations at S$30.4m (+13% yoy, 3% qoq) as a result of stable operational performance. The outperformance was due to higher than expected net property income (NPI) margins- 63% vs our estimated 57%. This was mainly because of lower operational costs through repackaging and renegotiation of its maintenance/security contracts and lower utilities expenses from lower oil prices. Distributable income came in at S$14.1m (+3% yoy), translating to a DPU of 1.85 Scts. For 1H10, AIT delivered a DPU of 3.91 Scts.

Moving NPI assumptions higher. We are adjusting our NPI margins higher to take into account the better than expected performance. As such, FY10F-11F DPU forecasts are adjusted upwards by 22% and 14% respectively.

Clear growth pipeline. Development of its 3 properties remains on track for completion by 2011, which will expand its portfolio by about 35% and result in a strong DPU CAGR of 9% over the next 2 years. In addition, its low gearing of c.13% as of 1H10 provides the trust with cS$180m (till 35% gearing limit) for opportunistic acquisitions.

Buy for growth, TP S$1.03. We find a-itrust’s DPU CAGR of 9% over FY10-12 to be attractive. In addition, opportunistic acquisitions that the trust could undertake, which are currently not factored into our forecasts, will remain further upside catalyst for stock price performance. Upgrade to BUY.