Ascendas India Trust - DBS Research 2017-02-01: Humming along

Ascendas India Trust - DBS Vickers 2017-02-01: Humming along ASCENDAS INDIA TRUST CY6U.SI

Ascendas India Trust - Humming along

  • 3Q17 DPU of 1.37 Scts in line with expectations.
  • Earnings boost from CyberVale 3 and income from nearly completed Victor building in Bangalore.
  • Trimmed FY17-18F DPU on delay in acquiring Blue Ridge Phase II and lower projected occupancy.



Still has legs to run. 

  • We maintain our BUY call on Ascendas India Trust (a-iTrust), with a revised TP of S$1.12. 
  • While a-iTrust has rallied over 30% since we upgraded the stock to BUY twelve months ago, and investor interest has picked up, we believe aiTrust’s growth story 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 6% and still decent 5.4-5.9% 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 square feet (sqft) IT building, as well as acquisitions of CyberVale, aVance 3 & 4, and BlueRidge Phase 2. 
  • Coupled with the potential for healthy rental reversions of 15-20% in Chennai and up to 5% for Hyderabad and Bangalore, we have confidence over a-iTrust’s ability to deliver robust 6% 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. 
  • Currently a-iTrust has low gearing of 30%, rising to 36-37% with planned developments and acquisitions in the next couple of years.


Valuation

  • With a slight delay in the acquisition of BlueRidge Phase II, we trimmed our DDM-based TP to S$1.12 from 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/ 2017-02-01
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.12 Down 1.130



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