Ascendas India Trust - DBS Research 2019-07-26: Another Stella Quarter


Ascendas India Trust - Another Stella Quarter

  • a-iTrust's 1QFY20 DPU of 2.05 Scts (+28% y-o-y) in line with expectations.
  • Stellar results led by prior investments in construction funding, completion of developments, and rental revisions in prior quarters.
  • 3-year DPU CAGR of 10% as a-iTrust increases its portfolio by 71% over the next few years.
  • Maintain BUY, Target Price of S$1.55.

What’s New

Strong 1QFY20 results – in line

  • As expected, ASCENDAS INDIA TRUST (a-iTrust, SGX:CY6U) delivered a very strong set of results with 1Q20 DPU up 28% y-o-y to 2.05 Scts.
  • The results were in line with expectations with 1Q20 DPU representing c.25% of our FY20F DPU.
  • 1Q20 DPU would have been better if not for the depreciation of the INR. DPU in INR terms was up 31% y-o-y to INR 1.05.

Boost from prior rental reversions and past investments

  • The robust DPU was mainly driven by 13% y-o-y increase in NPI to S$37.8m as a-iTrust benefited from the completion of the Anchor building (formerly known as MTB4) and positive rental reversions in prior quarters. This in turn resulted in properties in Bangalore, Hyderabad, Chennai and Pune delivering 3%, 2%, 2% and 4% increase in effective rents. Higher physical occupancies at aVance Pune (formerly BlueRidge II; 98% versus 78% in 1Q19) and ITPB (99% versus 94%) contributed to the jump in earnings.
  • Overall portfolio committed occupancy now stands at 99%. 1Q20 DPU also had a tailwind in the form of higher interest income as a-iTrust had provided construction financing for the development of AURUM IT SEZ, aVance 5 & 6, and aVance A1 & A2.

Initiatives to spur further growth

  • a-iTrust recently announced a forward purchase agreement to acquire BlueRidge 3, and a seventh warehouse at the Arshiya Free Trade Warehousing Zone. Combined with previously announced forward purchases and redevelopment plans, total floor area should increase by 71% to 22.3m sqft by end-2023.
  • Furthermore, recent transacted rents for a-iTrust’s various properties are 5-31% higher than current effective rents for the same properties. These factors should help a-iTrust deliver robust 10% DPU CAGR over the next three years.

Uptick in gearing

  • On the back of a-iTrust’s investments, gearing increased to 33% at end-Mar 2020, from 31% at end-March 2019.
  • Borrowing cost also edged up to 6.2% from 6.0% previously.

Maintain BUY, Target Price of S$1.55

  • On the back of a strong start to the year and visible growth drivers, we maintain our BUY call and street high Target Price of S$1.55

Derek TAN DBS Group Research | https://www.dbsvickers.com/ 2019-07-26
SGX Stock Analyst Report BUY MAINTAIN BUY 1.550 SAME 1.550