Tuesday, February 4, 2014

Ascendas India Trust: Aviator takes off (DBSV)

Ascendas India Trust:
STI : 3,100.24
HOLD S$0.71
Price Target : 12-Month S$ 0.73
Aviator takes off

•Underlying operations continue to strengthen
•Aviator to boost distributions; low gearing opens opportunities to inorganic growth
•Maintain HOLD, TP S$0.73

Highlights
Underlying operations continue to strengthen. In INR terms, Ascendas India Trust’s (a-itrust) underlying operational performance continues to improve with total property income increasing 3% to INR1.44bn. This was due to higher utilities recovery, supported by stable portfolio occupancy rates of c.97%. Portfolio retention rates remain high at c.93%.
Net property income (NPI) increased by 11% to INR911m, due to reversal of provision of rental arrears and management keeping a hold on costs.  Interest income increased by INR65m, due to contribution from aVance’s Fully Compulsory Convertible Securities (FCCDs) , derived from its investment in the third aVance Building. As a result, distributable income increased by 3% y-o-y to INR554m. Due to the appreciation of the SGD against the INR, distributable income after retention came in 8% lower y-o-y to S$10.0m, resulting in DPU of 1.10 Scts (-9.0% y-o-y).

Our View
Stable operating outlook; Aviator to underpin earnings growth. a-itrust have close to 28% of its NLA expiring in FY15F and we expect leasing activities to remain stable, given strong demand for space as evidenced by the strong retention rates of >90% over the past few quarters. Aviator, a c.600k-sqft (representing c.8% of the portfolio’s NLA) development in ITPB’s SEZ received its Occupancy Certificate on 8thJan’14 and is handling space over to tenants (100% committed). The property is expected to contribute progressively to rental income over FY15F once tenant fit-outs complete.

Conservative gearing of 22%; opportunities for inorganic growth.  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 has opportunities for development within its portfolio – c.1.9m of additional NLA at its SEZ at ITPB and could potentially look towards its sponsor Ascendas Land International (Cybervale, which consists of a 0.6m sqft income-producing property with vacant land and development potential for another 0.3m sqft). We have not factored in any acquisitions in our forecasts.

Recommendation
HOLD, TP of S$0.73 maintained. The expected weakness of the INR against SGD is likely to cap re-rating opportunities in the near term. Catalysts hinge on the execution of accretive acquisitions, implying upside to distributions. HOLD call maintained, TP S$0.73.


Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 24/01/14

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