Price (at 09:04, 27 Aug 2013 GMT) S$1.39
Valuation S$ 1.95
AIMS AMP Capital REIT presented at Day One of our Asean conference in Singapore.
Strong rent reversions. AAREIT achieved average rent growth of 15% in FY13 (81 leases and 33% of portfolio) and a further 14.2% of rent reversions in 1Q FY14 (31 leases and 5.6% of portfolio).
DPU growth from redevelopment projects. Over the next 18 months, AAREIT expects completion of phase 2E of the Gul Way and Defu Lane projects in May/June 2014 and phase 3 of Gul Way in Dec 2014. These projects will drive its DPU growth post the current fiscal year. These projects are also substantially leased, which ensures income stability and predictability.
Gearing of 25.4%. Debt is 100%-fixed at an all-in interest cost of 4.08% and average debt maturity of 3.0 years. The major capex will be for Gul Way phase 2E & 3 and the Defu Lane redevelopment. On completion, the gearing is expected to increase to circa 31%.
Earnings and target price revision
No changes to DPU estimates and TP.
12-month price target: S$1.95 based on a DCF methodology.
Catalyst: Completion of redevelopment projects over the next 12-18 months and yield-accretive acquisitions.
Action and recommendation
AAREIT’s share price has corrected about 20% in the past three months. We think this is overdone, given that its redevelopment projects are substantially pre-committed ahead of completion over the next 18 months. The shares are on 0.94x P/BV and offer a stable yield of 7.7% in FY3/14E.
Publish date: 27/08/13