STI : 3,205.24
Price Target : 12-Month S$ 0.73 (Prev S$ 0.75)
• Strengthening SGD-INR continues to be a drag on earnings
• Development of Aviator on track, 100% of space committed
• HOLD, TP revised to S$0.73
Weak Rupee remains a drag. In INR terms, Ascendas India Trust (aitrust)’ s underlying operational performance remained fairly stable, with total property income increasing 1% to INR 1.4bn. This was due to higher portfolio occupancy rates of c97%, supported by high retention rates of c95%.
Net property income (NPI) fell by a greater 5% to INR 801m due to higher utilities costs as a result of rising fuel costs. Interest income increased by INR 68.1m due to contribution from aVance’s Fully Compulsory Convertible Securities (FCCDs), derived from its investment in the third aVance Building. Interest cost was 16% lower y-o-y (or INR 28.6m) due to repayment of debt. Due to an 11% appreciation of the SGD against the INR, a-itrust’s gross revenues and NPI declined by 9% and 14% y-o-y to S$28.9m and S$16.4m respectively. Distributable income after 10% retention was higher by 8% y-o-y to S$10.0m. DPU of 1.10 Scts was 8% lower yo- y due to an enlarged share base.
Construction of Aviator on track; pre-commitments at 100%. Construction of Aviator, a 601,630 sqft development in ITPB’s SEZ, remains on track with pre-commitment of space at 100%, reducing execution risk for this development. The property is 85% completed and is expected to achieve completion by end of 2013 (3QFY14) and we expect this property (forming c8.6% of the portfolio NLA) to underpin the longer term earnings growth potential.
Low gearing of 21% opens opportunities for growth. We believe that the Manager continues to look for growth opportunities to gear the trust back towards the 30-35% comfort level in the medium term, implying a headroom of up to S$200m. a-itrust’s portfolio has opportunities for development – there is c1.9m of additional NLA at its SEZ at ITPB - and there are asset injection opportunities from its sponsor (Ascendas Land International (Cybervale, IT Park Pune) and Ascendas India Development.
HOLD, TP revised to S$0.73. The expected continued weakness of the INR-SGD will continue to be a drag on earnings and cap re-rating potential. HOLD call maintained, TP revised to S$0.73 as we adjust our INR estimates slightly.
Publish date: 28/10/13