AIMS APAC REIT - RHB Invest 2022-04-28: Steady Income Growth Ahead; Maintain BUY


AIMS APAC REIT - Steady Income Growth Ahead; Maintain BUY

  • Post FY22 (Apr 2021 to Mar 2022) results, we hosted the management of AIMS APAC REIT (SGX:O5RU) for an investor meeting, which was attended by ~15 regional investors. Management guided for a steady growth ahead, with healthy industrial demand, and long-lease profile underpinning income.
  • There is room for both organic growth (rent escalations, rent uplift) and inorganic growth (from redevelopment cum acquisitions). Minimal impact expected from rising interest rates and utility charges.

AIMS APAC REIT's 2H22 DPU down 4.8% y-o-y

  • AIMS APAC REIT's 2H22 DPU down 4.8% y-o-y mainly due to a timing difference on interest payments for S$250m perpetual security issuance (Sep 2021) and the completion of Woolworths HQ acquisition (mid-Nov 2021), while FY21 DPU was up 5.7% y-o-y. The results were a tad below our forecasts at 98% of our estimates.
  • About 62% of its debt is fixed (30% is hedged via swaps) and based on our sensitivity analysis, every 25bps increase in rates will have a 1% impact to its DPU (using conservative 62% fixed).
  • AIMS APAC REIT's portfolio value was up 1% mainly coming from Singapore (+1.6% y-o-y) on the back of income growth.
  • Utility charges are mostly a pass through for company’s portfolio and hence minimal impact is expected.

Strong positive rent reversion of +14.7% y-o-y

  • Strong positive rent reversion of +14.7% y-o-y driven by the renewal of Illumina, a key tenant, (+16%) in Singapore (8.1% of income) for a long 10-year master lease. The lease also has inbuilt rental escalations of 5% every two years.
  • AIMS APAC REIT's management noted that except for Singapore Business Park which recorded (-8%), all other segments recorded healthy positive rent reversions with a similar outlook ahead.
  • Portfolio occupancy was flattish q-o-q at 97.6%; ~14.4% of leases by income are due in FY23 including a logistics master lease. We expect occupancy to remain at the current high levels in FY23.

315 Alexandra Road acquisition still on cards

  • 315 Alexandra Road acquisition still on cards with an extension agreement signed to potentially complete it by 8 Jun. Management noted that the delay is mainly due to the leasing structure of the property in particular JTC’s anchor tenant rule, which is currently being worked on.
  • To recall, the acquisition was initially proposed last January for S$102m and on a 10-year master lease.
  • AIMS APAC REIT's gearing stands at 37.5% and - assuming full debt funding if above acquisition comes through - will move to 40%. Management is comfortable with the 40% level but will explore various funding options depending on market conditions.
  • In addition, it has an untapped 0.5m sqft of portfolio gross floor area which can be redeveloped including a potential conversion of a building into a datacentre.

We have revised lower FY23-24F DPU by 3-4%

Singapore Research RHB Securities Research | Shekhar Jaiswal RHB Invest | https://www.rhbinvest.com.sg/ 2022-04-28
SGX Stock Analyst Report BUY MAINTAIN BUY 1.66 DOWN 1.720