a-iTrust – JPM

Trust remains confident of withstanding near term headwinds

• Portfolio continues to demonstrate leasing strength: Notwithstanding concerns of potential IT/ITES slowdown and oversupply issues in Bangalore/ Hyderabad, management maintained that it continues to witness strong offtakes/rental increases in its asset portfolio. We note that ~24% of existing leases are up for renewal in FY09 and ability of the trust to renew / sign on additional leases at higher Y/Y rents should, in our view, provide proof of its ability to withstand a challenging macro environment.

• IT Park vs SEZ share price overhang: (1) Softer issues on regulation implementation, (2) remote location of new SEZ assets, (3) tenant motivation and (4) materially better quality of assets vs competition, were some of the key reasons underpinning management’s confidence in its ability to weather a potential tenant migration impact to SEZ.

• Funding issue – How bad is it for local players? Company is seeing opportunities for acquisition from unlisted players but did not think there was a funding distress as yet. Valuations in the primary market have not significantly come down, though deal flow has increased considerably.

• Maintain OW: We have recently revised our target price on ai-trust to S$1.36, as we factor in higher cost of capital (12.5%), in line with revisions done for other S-REITs. Key risks to our PT are changes in regulations/fiscal policy for IT Parks.