Ascendas India Trust (AIT SP) - DBS Research 2018-01-30: A Bumper Quarter

ASCENDAS INDIA TRUST CY6U.SI

Ascendas India Trust (AIT SP) - A Bumper Quarter

Ascendas India Trust (AIT)'s 3Q18 DPU of 1.64 Scts (+15% y-o-y) in line with expectations.
Boost from recent acquisitions and developments.
Future acquisition pipeline enhanced with development potential at The V increasing by more than 2.5x.
Maintain BUY with Target Price of S$1.25.

Ascendas India Trust (a-iTrust) had a strong quarter with 3Q18 DPU jumping 15% y-o-y to 1.64 Scts. This represented c.24% of our FY18F DPU and was in line with expectations.
Underpinning the growth in DPU was additional income from previously announced acquisitions and developments (Victor, BlueRidge 2, aVance 4 and Atria) and the impact from positive rental reversions achieved in prior quarters. These factors also resulted in revenue and net property income (NPI) in INR terms increasing by 18% and 23% y-o- y.
In 3Q18, we also understand average rents rose 2-3% at a-iTrust’s Bangalore properties, with rents at Hyderabad and Chennai increasing by 7% and 13% respectively. The improvement in rents is largely a function of declining vacancies in the respective submarkets.
Overall portfolio occupancy improved to 94% from 92% in 3Q17, largely driven by improvements at The V (98% vs 88% in 3Q17 which was impacted by the recently completed Atria building which is now 100% pre-leased) and BlueRidge 2 (72% versus 69% in 2Q18). Committed occupancy at BlueRidge 2 could also rise further as a-iTrust is currently in advanced negotiations for another 13% of the building.

Over the quarter, a-iTrust’s gearing increased marginally to 31% from 30% in 2Q18 with effective cost of debt dipping marginally to 6.4% from 6.5% in the preceding quarter.
The proportion of fixed rate debt fell to 90% from 93% at end September 2017.

Heading into 4Q18 and beyond, we expect the positive earnings momentum to continue as the trust benefits from its recently announced acquisitions and developments.
Specifically, for 4Q18, we expect a boost from the recently acquired warehouse portfolio.

Concurrent with its 3Q18 results, a-iTrust also announced that following discussions with the local authorities, it has received in principle approval to increase the plot ratio for The V property. The existing master plan allows for 1.7m sqft of leasable area which has now been increased to 4.5m sqft. This provides for a redevelopment pipeline over the next 7-10 years.
We believe this news further strengthens a-iTrust’s future growth pipeline and justifies the premium P/Bk that a-iTrust’s trades at.

With 11% capital upside and 5.5% yield, we maintain our BUY call with a Target Price of S$1.25.
We continue to advocate investors to remain overweight on a-iTrust given its strong growth profile (3-year DPU CAGR of 9%) with potential earnings upside from deployment its strong balance sheet.

Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2018-01-30

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.250 Same 1.250