Ascendas India Trust - DBS Research 2016-07-29: On the fast track

Ascendas India Trust - DBS Research 2016-07-29: On the fast track ASCENDAS INDIA TRUST CY6U.SI 

Ascendas India Trust - On the fast track

  • Acquires fourth aVance Business Hub property with total floor area of 390,000 sqft.
  • Total purchase consideration is INR1.8bn (S$36.4m).
  • DPU accretion c.1% p.a. in FY17-18F.



Still a compelling BUY. 


  • We maintain our BUY call on Ascendas India Trust (a-iTrust), with TP revised marginally to S$1.07. 
  • While a-iTrust has rallied over 25% since we upgraded the stock to BUY in late January, it remains an under-appreciated growth story. 
  • With Singapore-focused REITs facing headwinds translating into slowing DPU growth (average DPU CAGR of 2%), a-iTrust stands out with its 2-year DPU CAGR of 8% and a still decent 5.8% yield.


Clear growth drivers. 


  • 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 continued growth in the trust’s existing portfolio, we believe these clear growth drivers should provide confidence in AIT delivering a healthy 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 a 36% with planned developments and acquisitions in the next couple of years).


Valuation:


  • Our DDM based TP is raised to $1.07 from S$1.06 after incorporating the last aVance 4 acquisition.


Key Risks to Our View:


  • The key risk to our bullish stance is a significant depreciation of the INR and/or downturn in the Indian economy which will depress rents.




Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2016-07-29
DBS Vickers SGX Stock Analyst Report BUY MAINTAIN BUY 1.07 Up 1.06


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