Category: a-iTrust
a-iTrust – DBSV
In a stronger position to acquire
- 10% rise in S$-INR rate erodes true earnings potential
- Low gearing of 21% opens up debt-funded acquisition firepower
- HOLD Call, TP S$0.81 based on DDM
Highlights
Robust underlying growth. Ascendas India Trust’s (a-itrust) reported revenue and net property income (NPI) of S$31.7m (+4% yo-y) and S$18.6m (+7%y-o-y) respectively. In INR terms, underlying operational performance remained robust, with topline and NPI growing by 14% and 18% y-o-y to INR 1.40bn abd INR 0.8bn respectively. This was due to progressive recognition of rental income from Zenith, Park Square ad Voyager which continues to ramp-up operationally and the acquisition of aVance. Organically, aitrust’s portfolio continues to show stability with occupancy remaining a healthy 96% supported by strong tenant retention rates of c79%, while renewals remained stable. Distributable income was marginally higher y-o-y to S$12.26m. DPU (after 10% retention) amounted to 1.21 Scts. Whilst 19% lower yoy, it is stable on a sequential basis even after accounting for the enlarged share capital post the recent placement exercise.
Our View
Low gearing of 21% opens opportunities for growth. a-itrust has utilized part of the proceeds from the placement exercise to repay its short term MTNs and loans which resulted in its gearing level heading down to 21%. We believe that the manager continues to look for growth opportunities to gear the trust back towards the 30-35% comfort level in the medium term, implying a headroom of up to S$200m. Avenues are from a myriad of acquisition possibilities, from (i) previously alluded potential acquisitions from 3rd party vendors cS$100m or (ii) its sponsor for asset injection opportunities.
Construction of Aviator on track. Construction of Aviator, a 601-630 sqft development in ITPB’s SEZ is on track with pre-commitment of space at 26% (flat q-o-q). The property is expected to complete by end of 2013 (FY3Q14) and is expected to underpin the longer term earnings growth potential for a-itrust.
Recommendation
HOLD, TP S$0.81 maintained. Our HOLD call is premised on limited upside potential but could be hiked depending on acquisitions executed by the manager that we have not factored in at this moment. Stock offers a forward yield of 6.3% which we see as fair.