Ascendas India Trust - DBS Research 2017-04-27: Next Leg of Growth

Ascendas India Trust - DBS Vickers 2017-04-27: Next Leg of Growth ASCENDAS INDIA TRUST CY6U.SI

Ascendas India Trust - Next Leg of Growth

  • 4Q17 DPU of 1.54 Scts (+10% y-o-y) in line with expectations.
  • Strong growth on the back of past acquisitions and positive rental reversions.
  • Exciting times ahead - potential acquisition of aVance 5 and 6, and expansion into the warehouse market.



Still has legs to run. 

  • We maintain our BUY call on Ascendas India Trust (a-iTrust), with a revised TP of S$1.20. 
  • 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 8%.


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% in Hyderabad and Bangalore, we have confidence over a-iTrust’s ability to deliver robust 9% DPU CAGR over the next two years.


Untapped land bank and move into the warehouse industry.

  • Through its untapped land bank and sponsor pipeline, a-iTrust has access to c.5.3m sqft of floor area. Combined with the potential expansion into the Indian modern warehouse space, the trust has a visible and sustainable source of growth over the long term. The ability to execute on these growth opportunities is also supported by its healthy balance sheet. 
  • Currently, a-iTrust has a low gearing of 29%.


Valuation

  • After incorporating our new SGDINR exchange rate assumptions, we raised our DDM-based TP to S$1.20 from S$1.12.


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/ 2017-04-27
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.20 Up 1.120



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