SINGAPORE (Feb 2): Maybank is maintaining its “buy” call on AIMS AMP Capital Industrial REIT (AA REIT) with a lowered target price of $1.50.
The REIT on Thursday announced that its 3Q18 DPU increased 2.7% y-o-y to 2.62 cents.
This quarter’s DPU comprises an advanced distribution of 1.91 cents per unit for the period from Oct 1 to Nov 30 2017 and a distribution of 0.71 cents per unit for the period from Dec 1 to Dec 31 2017.
The REIT’s gross revenue dropped 2.2% y-o-y to $28.9 million, while net property income (NPI) fell 0.8% y-o-y to $19.2 million.
See: AA REIT reports higher 3Q DPU of 2.62 cents on advanced distribution from placement
AA REIT’s redevelopment at 8 Tuas Avenue 20 which achieved its Temporary Occupation Permit (TOP) on Aug 29 2017 is now 83.7% occupied, compared to 43.4% last quarter.
Meanwhile, Beyonics International has pre-committed to a 10-year master lease at AAREIT’s first build-to-suit development at 51 Marsiling Road, with minimum 2% per annum rental escalations. Rental income is expected to commence in 1Q19.
With development cost 11% lower than its budget, the project achieved a profit of $8.1 million, 2.3 times initial estimates, while its 10% NPI yield is also ahead of its 8.9% guidance.
In a Thursday report, analyst Chua Su Tye says, “The completion of its redevelopment project and first build-to-suit building should support FY18-20 DPUs.
In addition, AA REIT announced the divestment of its smallest asset, 10 Soon Lee Road, for $8.17 million, which is a 28% premium to its last valuation.
The REIT’s occupancy portfolio however declined q-o-q to 88.4%, with a negative rental reversion of 15.1%.
Aggregate leverage fell from 37.3% to 33.8% as at end-Dec 2017, as $55 million was raised from a private placement of 42.1 million new units priced at $1.305 per unit. This was part of the REIT’s move to reduce borrowings and lift debt headroom.
“We see further asset-rejuvenation opportunities. About 8% or 0.6m sf of its portfolio GFA is under-utilised. We estimate this could generate 5% DPU growth from additional AEI/redevelopment,” says Chua.
“Implied 7.4% dividend yields are compelling against 6.7% for industrial REIT peers, especially with upside potential from any further AEI or redevelopment,” adds Chua.
As at 3.47pm, units in AA REIT are trading at 0.9 times FY18 book with a DPU yield of 7.4%.
