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

Ascendas India Trust (AIT SP) - DBS Vickers 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.

What’s New

3Q18 DPU up 15% y-o-y

  • 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.

Relatively stable gearing and borrowing costs

  • 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.

Positive momentum to continue

  • 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.

Expands development pipeline

  • 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.

Maintain BUY with Target Price of S$1.25

  • 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