AIMS APAC REIT - Maybank Kim Eng 2020-08-06: Ramping Up

AIMS APAC REIT (SGX:O5RU)

AIMS APAC REIT - Ramping Up

We fine-tuned estimates following AIMS APAC REIT (SGX:O5RU)'s in-line 1Q21 with DPU at -20.0% y-o-y, flat q-o-q. A SGD2.6m provision for rent relief was partially offset by its retained income in 4Q20.
Strong leasing momentum, underpinned by increased demand for stockpiling and inventory requirements, pushed up occupancies by 4.2ppt to 93.6%, with its five Singapore ramp-ups (at 45% of its portfolio NLA), full as of end-Jun 2020. We expect rents to be supported into FY21, with the majority of its 16.2% of leases expiring in the year concentrated at its warehouse and logistics assets.
Redevelopment growth optionality from its underutilised GFA continues to offer 4-5% potential upside risk and remains backed by its low 35.4% leverage.

AIMS APAC REIT's valuations are undemanding at 7.4% DPU yield and 0.9x FY21E P/B. BUY; SGD1.50 DDM-based Target Price (COE: 7.5%, LTG: 1.5%).

AIMS APAC REIT's 1Q21 revenue and NPI fell 10.9% y-o-y and 18.8% y-o-y with:
1. a SGD2.6m provision for rent waivers,
2. lower contributions from 1A IBP and 20 Gul Way with their conversion from master leases to multi-tenancies, and
3. expiry of the master leases at 30 Tuas West Road (of two phases) and 541 Yishun Industrial Park A (in Apr 2020).
This was partially offset by the contributions from Boardriders in Queensland, Australia (acquired in Jul 2019) and 3 Tuas Avenue 2 which was completed in Jan 2020. The latter is fully-leased to medical device manufacturer ResMed (RMD US), which contributed 3.7% of its 1Q21 gross rental income. The ten-year lease has a 20-year renewal option, and is embedded with two-year rental escalations, and therefore accretive to revenue and NPI.

AIMS APAC REIT's portfolio occupancy improved q-o-q from 89.4% to 93.6%, due to better occupancies at 20 Gul Way and 27 Penjuru Lane. Twenty new and renewal leases totalling ~77.0k sqm were executed in 1Q21, representing 11.4% of its total NLA, which was a 151.4% jump from the 30.6k sqm secured in 4Q20.
Rental reversion was at -9.0% vs -4.0% in 4Q20, as its light and general industrial segments faced pressure, even as rents for logistics and warehousing facilities remained strong.
C&P Logistics has expanded its space at 20 Gul Way and now ranks among its top ten tenants at 2.0% of its gross rental income. Meanwhile, CWT’s contribution at 2.8% is set to fall further, as its final leases expire in Jul 2021.
See AIMS APAC REIT Share Price; AIMS APAC REIT Target Price; AIMS APAC REIT Analyst Reports; AIMS APAC REIT Dividend History; AIMS APAC REIT Announcements; AIMS APAC REIT Latest News.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-08-06

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