SINGAPORE (Aug 1): Riding on the fast growing IT and logistics industries in India, Ascendas India Trust (a-iTrust) is expecting rentals in Bangalore and Hyderabad’s IT Corridor I to increase over the next few quarters on the back of sustained demand.
In particular, the trust’s logistic park, Arshiya Free Trade Warehousing Zone (FTWZ) in Panvel, near Mumbai, has faced an increase in demand from existing and prospective tenants.
This prompted a-iTrust to build – and later acquire when completed – an additional warehouse there.
See: Ascendas India Trust to build and acquire warehouse in Panvel for $42.1 mil
Meanwhile, rentals in Grand Southern Trunk and Hinjawadi, where CyberVale and aVance Pune are located, are expected to remain stable.
a-iTrust currently has seven IT parks and one logistics park in India, with a combined total floor area 13.1 million sq ft spread across Bangalore, Chennai, Hyderabad, Pune and Mumbai.
In its latest 1Q19 results, a-iTrust recorded a 28% jump in its DPU to 2.05 cents from 1.60 cents in 1Q18.
This came on the back of a 10% y-o-y increase in property income to $49.2 million, which brought net property income to $37.8 million, 13% higher than the previous year.
There was also a near fourfold increase in interest income to $10.5 million from construction funding of Aurum IT SEZ, aVance 5 & 6 and aVance A1 & A2.
See: Ascendas India Trust declares 28% higher 1Q19 DPU of 2.05 cents on higher net property and interest income
Following a-iTrust’s positive 1Q results, analysts are remaining optimistic on the stock.
Jefferies is keeping its “buy” call with an increased target price of $1.75 from $1.20 previously.
“AIT has been and will continue to deliver DPU growth, in our view. Combined with the ongoing cap rate compression and emerging presence in logistics, AIT seems to be in a sweet spot,” says analyst Krishna Guha in a July 29 report.
On June 30, CapitaLand completed its transaction to acquire all the issued shares of Ascendas and Singbridge, creating one of Asia’s largest diversified real estate groups. And now, with a new sponsor, a-iTrust is part of a larger group, which Guha believes may lead to access to more capital, deal pipeline and funding partners.
Similarly, DBS Group Research is maintaining its “buy” call on a-iTrust with a target price of $1.55, on the back of the trust having a strong start to the year and visible growth drivers.
The acquisition of the additional warehouse at the Panvel FTWZ, along with the trust’s previously announced forward purchases and redevelopment plans, total floor area should increase by 71% to 22.3 million sq ft by end-2023. Additionally, recent transacted rents for aiTrust’s various properties are 5-31% higher than current effective rents for the same properties.
In a 26 July report, analyst Derek Tan says that these factors should help the trust deliver robust 10% DPU CAGR over the next three years.
As at 3.30pm, units in a-iTrust are trading flat at $1.41, or 1.2 times FY20 book with a distribution yield of 6.1%.
