.SI
AIMS AMP Capital Industrial REIT - Rolling on the waves
- Stable DPU outlook due to earnings visibility.
- Organic growth potential from redevelopment.
- Total return exceeds 18% with 8% yield.
The Business
A diversified portfolio of industrial assets.
- AAREIT invests in a diversified portfolio of 25 industrial estates located in Singapore and a JV in Australia (as at 31/03/2016). The properties types are diversified into warehousing and logistics, business parks, light industries, high tech and manufacturing activities, which support tenants in a myriad of different industries.
Ability to sustain DPU amidst headwinds.
- We expect AAREIT to weather through the current industrial downcycle, and to deliver stable returns over FY17F-18F.
- While we expect certain master leases will not be rolled over in the coming years as we have projected the contribution from master-leases to decline from 50% to 35% by the end of FY18), underlying occupancies are expected to be fairly high, implying that the downside to earnings is likely to be marginal.
31% of potential untapped GFA.
- We see untapped value from its portfolio, coming from c.760,000 sqft or 31% of additional GFA to be deployed in the existing portfolio by redeveloping the under-utilised properties, providing inorganic growth opportunities.
- Planned optimization of these spaces could mean upside to distributions, NAVs when executed upon.
The Stock
Attractive 8% yield.
- The REIT has a DCF-based valuation (7.2% WACC and 1% terminal growth rate) of S$1.52, i.e. 1.0x P/BV, and an 8% forward yield based on the latest traded price of S$1.38, indicating a potential total return of 18.4%.
- Currently trading at 0.93x P/BV, the downward pressure in price is limited.
Vacancy a key downside risk.
- Worse-than-expected occupancy rate could deteriorate DPU and eventually the unit price.
Singapore Research Team
DBS Vickers
|
Derek Tan
DBS Vickers
|
http://www.dbsvickers.com/
2016-05-24
DBS Vickers
SGX Stock
Analyst Report
1.38
Same
1.38
