SINGAPORE (May 27): DBS Group Research likes AIMS APAC REIT (AA REIT) for its Singapore-focused diversified asset portfolio and attractive exposure to in-demand properties such as business parks and modern ramp-up facilities.
Supported by master leases with built-in rental escalations, DBS says AA REIT also offers investors a higher degree of income certainty ahead of the sector’s anticipated recovery in 2020.
With AA REIT’s latest acquisition of Boardriders APAC HQ – a light industrial facility in Gold Coast, Australia – dividends yields will be enhanced to an attractive 7.5% p.a. over FY20-21F.
See: AA REIT acquires Boardriders APAC HQ in Queensland for $37 mil
See also: AA REIT declares 4.6% increase in 4Q DPU to 2.75 cents
In a May 16 report, lead analyst Carmen Tay says AA REIT is unique for its 600,000 sf of untapped gross floor area (GFA) which is one of the highest among peers.
Given the prime location of selected properties, Tay believes the manager can potentially redevelop these sites into future-proof assets such as data centres.
She also estimates that the unlocking of unutilised GFA could lift AA REIT’s pro forma FY19 revenue and NAV by 14.7% and 10.3% respectively.
Tay also sees AA REIT as a prime acquisition candidate with consolidations among industrial REITs in focus. given its fragmented shareholding structure and access to untapped GFA within the portfolio.
Including untapped GFA, AA REIT’s implied yield (NPI/EV) of 6.4% would place it at the upper end of its peer range of 5.1-6.6%, says Tay.
“Maintain ‘buy’ with DCF-based target price of $1.50, which assumes terminal growth rate of 1.5%. The redevelopment of AA REIT’s underutilised sites could raise its fair value to $1.58,” concludes Tay.
As at 11.08am, units in AA REIT are trading at $1.39, up 6 cents year to date.
