AIMS AMP Capital Industrial REIT
PRICE as of 29 Oct 2013 SGD 1.57
PRICE TARGET SGD 1.66
Reaping redevelopment returns and all set for the next phase of growth
•Aims AMP Capital Industrial Trust’s (AAREIT) 2QFY14 results were in line with consensus.
• We raise our FY14/15-16/17E DPU estimates to factor in slightly stronger operational performance.
• With growth catalysts lined up, AAREIT offers a FY14-16E DPU CAGR of 5.2%, the highest among industrial SREITs.
• We raise our price target by 5% to SGD 1.66 and upgrade our rating to Outperform from In-Line.
AAREIT 2QFY14 DPU in line with consensus: AAREIT’s 2QFY14 DPU of S¢2.75 grew 10% y/y and q/q, led by income contribution from Phase 2 of 20 Gul Way and improved occupancy at 56 Serangoon North Avenue 4. DPU was in line with consensus and broadly in line with our S¢2.62 estimate. NPI of SGD 18.2mn was in line with consensus and our estimates (+3%).
Highest FY14-16E DPU CAGR in the sector: AAREIT offers FY14-16E DPU and EPU CAGRs of 5.2% and 7.8%, respectively, the highest among industrial SREITs. We expect 103 Defu Lane, Phase 2E and Phase 3 of 20 Gul Way to contribute 12% of portfolio NPI by end-FY14/15. We continue to expect AAREIT to acquire SGD 100mn of assets over the next 12 months at an average 7% NPI yield, fully utilising proceeds from its equity raising in April 2013 and raising gearing to 35% from 25% currently.
Growth catalysts lined up; ready for the next leg of growth: We adjust our FY14/15-16/17E NPI estimates by 2% on average, as we factor in stronger operational performance but delay our acquisition assumptions slightly. AAREIT’s asset portfolio has one of the most under-utilised plot ratios among SREITs, in our view. We expect management to continue undertaking redevelopment initiatives after its ongoing projects are completed by March 2015.
Raise our PT by 5% to SGD 1.66; upgrade to Outperform: We roll over our estimates and lift our FY14/15-16/17E DPU forecasts by 4% on average. We upgrade AAREIT to Outperform from In- Line. A key risk to our recommendation could be a lower-than-expected acquisition yield. Our valuation uses a 3.25% risk-free rate, a beta of 0.85, a market risk premium of 6.5% and a terminal growth rate of 0.75%.
Publish date: 29/10/13