– Target of S$1.75: Ascendas India Trust (a-iTrust) is India’s first incomegenerating REIT-like business trust, offering exposure to income-generating Indian IT/ITES assets with well contained development risks. We initiate at Buy / Low Risk (1L) with a target price of S$1.75 based on our DDM, recognizing strong DPU CAGR of 28% over FY08E-10E, well above peers, a relatively predictable income stream, and ascribing value for its 24-acre land bank, development ofwhich remains a potential trigger for the stock.

– High quality IT/ITES assets, sponsor and asset mix: Portfolio is prime: 3.6m sq ft of Indian IT/ITES assets, well balanced across geographies, tenants and leases, and in the midst of a commercial real estate boom. The sponsor – Ascendas – has a good track record across the Asian region, is committed to India, and will be routing all its India asset holding through this vehicle.

– Potential opportunities to boost growth: Beyond strong DPU growth and yield, a-iTrust has potential growth opportunities: a) built-in development pipeline of SEZ project (2.7msq.ft), b) acquisition potential enhanced by its right of first refusal to acquire assets owned by its sponsors, and c) low gearing. This could boost DPU growth by 10%-37% by FY13E. However with limited details on actual timing, we have not presently built this into our estimates or target.

– Key risks:
1) Evolving regulatory risks in respect to forex repatriation of funds.
2) Forex volatility adversely impacting returns.
3) Potential supply/demand risks in IT/ITES locations.
4) Conflicts of interest between sponsor and a-iTrust.