DBS Group Research, RHB Group Research, Maybank Kim Eng and Soochow CSSD Capital Markets (SCCM) are positive on AIMS APAC REIT’s (AA REIT) outlook after the REIT released its 4QFY2021 ended March results on May 5.
DBS analysts Dale Lai and Derek Tan have maintained their ‘buy’ rating for the counter with a higher target price of $1.60 in its May 6 research note, noting that AA REIT’s FY2021 distribution per unit (DPU) of 8.95 cents was above their estimates.
The analysts note that AA REIT’s results had “many positives”, including better-than-expected rental performance and lower rent relief. In addition, income from a new master lease and its Bulim Street acquisition also contributed to earnings.
Lai and Tan are bullish on AA REIT’s increased exposure to logistics, which accounts for 35% of its portfolio as of FY2021. They believe the segment will contribute to the REIT’s organic growth in FY2022, driven by positive rental reversions and sustained occupancy.
The analysts believes that a data centre play is possible for the REIT, given its 500,000 square feet of untapped gross floor area (GFA) that could potentially be converted into data centres.
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To that end, Lai and Tan believe that AA REIT is an attractive takeover target. “We believe that AA REIT remains an attractive takeover target at 1 time P/NAV with upside coming from the maximation of its portfolio GFA,” they say.
The analysts anticipate AA REIT to deliver an 11% rebound in DPU for FY2022 on the back of a recovery in earnings and contribution from recent acquisitions. Their DPU estimates have been raised by 4% - 6% to account for better rental growth and occupancies as well as lower interest costs.
For RHB’s Vijay Natarajan, AA REIT’s 4QFY2021 results met his expectations and indicate that its operating metrics are “moving in the right direction”.
He has also maintained his ‘buy’ rating for AA REIT, with a higher target price of $1.58 from $1.55 previously. The higher target price reflects higher DPU forecasts by 1% - 2% for FY2022 - FY2023 on better rental growth.
Natarajan is similarly positive on prospective rental growth for AA REIT, driven by the high demand logistics segment.
He also highlights that the REIT’s modest gearing levels at 33.9% provide headroom for asset enhancement initiatives (AEIs) and acquisitions. “We expect the REIT to continue its acquisition trajectory, with potential acquisitions of $100-200 million in assets per annum,” he says.
He anticipates AA REIT’s FY2022 DPU to grow 10%, driven by higher portfolio occupancy, earnings accretion from acquisitions, absence of rental rebates, and lower interest expense.
SCCM analyst Soh Lin Sin is similarly upbeat on AA REIT's headroom to pursue more accretive acquisitions. She points out that its acquisition of 315 Alexandra Rd, which is currently pending JTC’s approval, is expected to be 5.1% and 5.4% DPU accretive on a pro-forma basis for FY2020 and FY2021 respectively.
SEE:AIMS APAC REIT posts 42% higher 4Q21 DPU of 2.9 cents, but 6% lower FY21 DPU
Soh maintains her 'buy' rating on AA REIT with an unchanged target price of $1.60.
Maybank's Chua Su Tye was prompted raise his DPU estimates by 4% - 5% to reflect the "stronger-than-expected" 4QFY2021. To that end, his unchanged 'buy' rating is now accompanied by a higher target price of $1.60 from $1.50 previously.
Like the other analysts, Chua sees a pick-up in leasing demand for industrial and logistics space, better-than-anticipated rental reversions, and accretive acquisitions and redevelopment projects to drive upside on the counter. Conversely, a slow-down in demand, termination of leases, AUD/SGD volatility, and sharper-than-expected interest rates pose potential risks for AA REIT.
As at 3.35pm, units in AA REIT are up 1 cents or 0.72% higher at $1.40.
