Ascendas India Trust - DBS Research 2019-01-25: Still Flying Despite Currency Headwinds


Ascendas India Trust - Still Flying Despite Currency Headwinds

  • a-iTrust's 3Q19 DPU of 2.05 Scts (+25% y-o-y) ahead of expectations.
  • Excluding one-off tax benefit, normalised 3Q19 DPU still up 8% y-o-y, a credible result considering 10% INR drop.
  • Planned 61% increase in floor area over the next few years to translate to strong DPU growth.
  • Maintain BUY, Target Price of S$1.25.

What’s New

Faster than expected 3Q19 DPU growth

  • ASCENDAS INDIA TRUST (SGX:CY6U, a-iTrust) reported strong 3Q19 DPU of 2.05 Scts, which was 25% y-o-y higher. This translated to 9M19 DPU of 5.63 Scts (+27% y-o-y) which represents c.82% of our FY19F DPU and was above expectations.
  • The stronger than expected result was mainly driven by c.S$3.2m worth of one-off tax benefits from the merger of the legal entities of The V and BlueRidge 2, and higher than expected interest income. Excluding this one-off tax benefit, normalised 3Q19 DPU would have risen by 8% y-o-y to 1.77 Scts.
  • The 8% growth is still three to four times faster than other listed S-REITs and a credible result considering the 10% depreciation in the INR since 3Q17.
  • Underpinning the strong 3Q18 results was additional income from an earlier purchase of Arshiya warehouses, higher earnings from BlueRidge 2 and Atria Building as well as higher interest income from investments in AURUM IT SEZ, aVance 5 &6 and aVance A1 & A2 via construction funding. Plus, a-iTrust also benefited from positive rental reversions which translated to 9%, 5% and 4% y-o-y increases in effective rent for properties in Chennai, Bangalore/Pune and Hyderabad respectively.

Well placed to take advantage of investment opportunities

  • While gearing ticked up marginally to 33% from 32% in the preceding quarter, with its strong balance sheet, a-iTrust is well positioned to take advantage of potential investment opportunities besides its announced expansion plans.
  • Through the use of fixed rate borrowings (c.84%), average cost of debt was stable at around 6.1%.
  • Adjusted net asset value per unit increased marginally to S$1.12 from S$1.08 in 2Q19.

Maintain BUY, Target Price of S$1.25

  • We remain bullish on a-iTrust’s prospects given the planned 61% increase in floor area over the coming few years which should translate to DPU CAGR of over 10% per annum.
  • Evidence of the strong momentum from already announced acquisitions/investments can be seen by the better than expected 3Q19 results and jump in DPU. Should the Trust continue to outperform in 4Q19, there is upside risk to our earnings and Target Price.
  • Given 16% capital upside to our Target Price of S$1.25 and attractive 6.3% yield, we reiterate our BUY call.

Mervin Song CFA DBS Group Research | Derek Tan DBS Research | https://www.dbsvickers.com/ 2019-01-25
SGX Stock Analyst Report BUY MAINTAIN BUY 1.250 SAME 1.250