Ascendas India Trust - DBS Research 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.

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.

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.

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.

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.

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