Ascendas India Trust - DBS Research 2016-10-26: Still under the radar

Ascendas India Trust - DBS Vickers 2016-10-26: Still under the radar ASCENDAS INDIA TRUST CY6U.SI

Ascendas India Trust - Still under the radar

  • 2Q17 DPU of 1.37 Scts in line with expectations.
  • Stronger 2H17 on higher contribution from the new Victor Building at ITPB and acquisition of BlueRidge Phase 2.
  • TP raised to S$1.13 from S$1.07 as we roll forward valuation base to FY18.



Still has legs to run. 

  • We maintain our BUY call on Ascendas India Trust (a-iTrust), with a revised TP of S$1.13. 
  • While a-iTrust has rallied over 30% since we upgraded the stock to BUY in late January, and investor interest has picked up, we believe aiTrust’s growth story still has yet to gain recognition among investors at large. 
  • With Singapore-focused REITs increasingly facing headwinds translating into slowing DPU growth (average DPU CAGR of 1%), we anticipate investors will gravitate to aiTrust given its healthy 2-year DPU CAGR of 8% and a still decent 5.5% yield.


Clear growth drivers with prospects of healthy rental reversions ahead. 

  • Over the past year, a-iTrust has announced several developments including the construction of The V, a new 408k sqft IT building, as well as acquisitions of CyberVale, aVance 3 & 4 and BlueRidge Phase 2. 
  • Coupled with the potential for healthy rental reversions ahead, of 12-20% in Chennai and up to 5% for Hyderabad and Bangalore, provides confidence over aiTrust’s ability to deliver a robust 8% DPU CAGR over the next two years.


Untapped land bank and acquisition pipeline. 

  • Through its untapped land bank and sponsor pipeline, a-iTrust has access to c.5.9m sqft of floor area. This provides the trust with a visible and sustainable source of growth over the long term. 
  • The ability to execute on these growth opportunities is supported by its healthy balance sheet (current gearing is low at 29%, rising to c.36% with planned developments and acquisitions in the next couple of years).


Valuation

  • As we roll forward our valuation base to FY18, we raise our TP to S$1.13 from S$1.07 based on DDM.


Key Risks to Our View

  • The key risk to our bullish stance is a significant depreciation of the INR, downturn in the Indian economy which will depress rents or delays in the completion of announced acquisitions and development projects.




Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2016-10-26
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.13 Up 1.070



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