AIMS APAC REIT - Maybank Kim Eng 2021-05-06: Rising Visibility

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AIMS APAC REIT (SGX:O5RU)

AIMS APAC REIT - Rising Visibility

Strong quarter, upping DPUs, target price

• We raised AIMS APAC REIT (SGX:O5RU)'s DPUs forecast by 4-5% to factor in the stronger than-expected 4Q21 results and the recent 315 Alexandra Road deal.
• Leasing activity has gained pace, with rental reversion at +2.3% (from +1.1% in 3Q21, -4.0% in 2Q21), suggesting rents have likely bottomed out. This is underpinned by stronger leasing momentum, especially for its logistics properties.
• AIMS APAC REIT's balance sheet is strong, helped by the recent S$125m perps deal, with valuations undemanding at 7.0% DPU yield, 0.9x FY21E P/B.
• We raised our DDM-based target price for AIMS APAC REIT to S$1.60 (COE: 7.6%, LTG: 1.5%). BUY.

Revenue and NPI up y-o-y, q-o-q

• AIMS APAC REIT's 4Q21 revenue jumped 16.1% y-o-y and 1.0% q-o-q, while NPI rose 17.0% y-o-y and 1.8% q-o-q. This was driven by
  1. contribution from 7 Bulim Street (acquired in Oct 2020),
  2. the new master lease at 541 Yishun Industrial Park A (from Jan 2021), and
  3. higher rental and recoveries at 3 Tuas Ave 2, 20 Gul Way, and 27 Penjuru Lane.
• These helped offset
  1. S$1.7m in revised additional rent relief for additional tenants, and
  2. lower rental and recoveries from 15 Tai Seng Drive and 103 Defu Lane 10.
• A remaining S$1.1m retained in 4Q20 was fully released through 4Q21 distributions.

Stable occupancies, underpinned by leasing activity

• AIMS APAC REIT's portfolio occupancy was stable q-o-q at 95.4% (from 95.7% in 3Q21), and above the 90.0% market average. This was helped by 315 Alexandra Road, acquired on 27 Jan at 6.2% initial NPI yield. It is 98.3% occupied, with Sime Darby as an anchor tenant, and backed by a 10-year lease term at +2.25% pa rental escalation.
• AIMS APAC REIT executed 37 new and renewal leases at ~104k sqm, or 14.0% of its NLA. Vacancies remain tight, on the back of stronger demand for its logistics and warehouse facilities (at ~52% of AUM).

Sound balance sheet, deal upside

• AIMS APAC REIT's balance sheet remains strong with leverage at 33.9% as of end-Mar 2021 (from 34.1%), with interest cover at 4.0x (from 3.8x) and debt costs down q-o-q to 3.0% (from 3.5%). We estimate S$650m in debt headroom (at 50% limit), to fund acquisitions (in Singapore or Australia).
• See
  • AIMS APAC REIT's Share Price,
  • AIMS APAC REIT's Target Price,
  • AIMS APAC REIT's Analyst Reports,
  • AIMS APAC REIT's Dividend History,
  • AIMS APAC REIT's Announcements,
  • AIMS APAC REIT's Latest News.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-06

SGX Stock Analyst Report BUY MAINTAIN BUY 1.60 UP 1.500