SINGAPORE (Nov 27): DBS Research has upgraded its call on Ascendas India Trust (a-iTrust) to “buy” from “hold” with a revised target price of $1.25.
DBS says the recent acquisition of a portfolio of warehouses is a “transformative transaction” which would provide a new leg of growth for the business space trust.
See: Ascendas India Trust to acquire six warehouses in India for up to $112.5 mil
“This acquisition combined with other announced redevelopments or acquisitions should result in a-iTrust delivering an SREIT leading three-year DPU CAGR of 9%, three to four times the average SREIT,” says lead analyst Mervin Song in a Monday report.
a-iTrust has signed an agreement with Arshiya for the acquisition of six modern warehouses with total floor area of 832,000 sf in Panvel following the signing of a term sheet in April this year.
Panvel is an important warehousing hub and is in close proximity to Jawaharlal Nehru Port Trust which handles about 56% of India’s container traffic. It also has easy access to the key markets of Mumbai city, Thane, Kalyan, and Vashi.
The total consideration for the warehouses consists of an upfront payment of INR4.34 billioon ($91.4 million) and an additional deferred consideration of up to INR1 billion ($21.1 million) to be paid over the next four years, linked to the achievement of certain performance milestones.
On completion of the acquisition in the next 1-2 months, Arshiya will enter into an agreement with a-iTrust to lease the warehouses for a period of six years with inbuilt annual rental escalations.
Arshiya will continue to operate and manage the warehouses and pay the pre-agreed rentals to a-iTrust as a-iTrust currently does not have any experience in managing warehouses in India.
a-iTrust has access to over 5 million sf of floor area. Combined with the recent expansion into the Indian warehouse space which provides for a potential acquisition pipeline of 2.8 million sf, a-iTrust has a visible source of growth over the long term.
The ability to execute on these growth opportunities is also supported by its strong balance sheet, adds Song.
“Post the acquisition, we estimate a 3-6% accretion to our FY17-19F DPU,” says Song.
Units in Ascendas India Trust are up 1 cent at $1.14 with a FY19 forecast distribution yield of 5.8%
