Monday, October 28, 2013

AIMS AMP Capital Industrial REIT : Higher DPU, Long Term Growth Intact (S&P)

AIMS AMP Capital Industrial REIT
Price: SGD1.49 Date: October 23, 2013

Higher DPU, Long Term Growth Intact
• Results in line with expectations. AIMS AMP Capital Industrial REIT’s (the Trust) 1HFY14 (Mar) results were in line with our expectations. The Trust reported revenue and net property income (NPI) of SGD51.5 mln (+21.0% YoY) and SGD34.0 mln (+14.6% YoY), respectively. These were mainly due to higher rental contribution from 20 Gul Way following the completion of its Phase One and Phase Two redevelopment. Higher rental rates were achieved by 27 Penjuru Lane and 8 & 10 Pandan Crescent as the properties reverted to multitenancy properties.

• Higher DPU QoQ. The highlight of its 2QFY14 results is a 16.0% QoQ rise (+29.2% YoY) in distribution to the unitholders. The Trust declared a distribution per unit (DPU) of 2.75 cents for the quarter (1QFY14: 2.5 cents), bringing its 1HFY14 DPU to 5.25 cents (+5.0% YoY), in line with expectations. The higher distribution was due mainly to contribution from Phase 2 of 20 Gul Way (income producing since July 7, 2013), as well as higher revenue from 56 Serangoon North Avenue 4 due to an increase in occupancy rates.

• Strong rental reversion and favorable occupancy rate. The Trust achieved strong rental reversion in 2QFY14 (six new/renewal leases signed with weighted average rental increase of 20.7%) on the back of management’s intensive lease management. Meanwhile, the Trust continued to achieve high occupancy rate of 98.0% for its portfolio as at end-September 2013 (unchanged QoQ). This compares favorably with the average industrial occupancy of 92.4% for factories and 92.8% for warehouses, based on URA data (as at end-June 2013).

• Stable performance expected. Management believes that the Trust is well-placed to maintain a stable performance going forward and will remain focused on unlocking value within the portfolio through selective developments and intensive asset management. In addition, management does not rule out potential acquisitions in the near term. We believe that there are investment opportunities for the Trust to expand to Australia, where it has a competitive advantage given that its major sponsors are located there.

• Key risks: Demand for warehouses and factories in Singapore and the region could be affected adversely by a global epidemic or sharply slower global economic growth. Meanwhile, any downturn in Singapore’s economy or industrial property market will have a dampening impact on the Trust’s business prospects, as all its industrial properties are located in Singapore.

Earnings Outlook
Revenue Drivers:
• The Trust’s rental income is contributed by single tenant master leases (FY13: 57.0%) and multi-tenancy properties (FY13: 43.0%). The master leases provide for longer lease durations and organic rental growth, supported by structured rent escalations on the 14 master leased properties.

• Meanwhile, the 11 multi-tenancy properties (typically shorter leases of around three years) allow the Trust to enjoy potential positive rental reversions.

• The redevelopment of underutilized assets will also increase the lettable area of the Trust’s portfolio and improve revenue.

• We expect industrial rental rates to stay relatively stable, as Singapore’s economic growth remains healthy. On the other hand, any increase in rents is expected to be limited, due to future supply pressures.

Net Property Income Outlook:
• We forecast the Trust’s NPI to increase by 16.6% YoY in FY14, due mainly to full-year contribution of Phase One redevelopment of 20 Gul Way and additional rental income from the Phase Two redevelopment from 2QFY14 onwards.

• In FY15, we expect the Trust’s NPI to grow by 7.5% YoY, given the expected contribution from redevelopment of 103 Defu Lane 10 and 20 Gul Way.

• Given the positive NPI outlook, we project the Trust’s DPU to grow by 4.5% YoY and 7.1% YoY to 11.2 cents and 12.0 cents for FY14 and FY15, respectively

Source/Extract/Excerpts/来源/转贴/摘录: S&P Capital IQ Equity Research -
Publish date: 23/10/13

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