Ascendas India Trust - DBS Research 2017-01-04: Still under the radar

Ascendas India Trust - DBS Vickers 2017-01-04: Still under the radar ASCENDAS INDIA TRUST CY6U.SI

Ascendas India Trust - Still under the radar


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 a-iTrust’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 a-iTrust 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 a-iTrust’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

  • We maintain our DDM-based TP of S$1.13.


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/ 2017-01-04
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.130 Same 1.130






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