Thursday, July 30, 2015

AIMS AMP Industrial REIT

AIMS AMP Industrial REIT: (S$1.485) Slow start to 1QFY16; could outlook be worse?

AIMS AMP REIT’s 1QFY16 results came in a tad below estimates with distributable income at $17.4m (+10% y/y, -5.8%q/q) and DPU at 2.75¢ (+7.8% y/y, -5.8% q/q), forming 23% of full year consensus estimates.

Gross revenue climbed to $30.3m (+10.7% y/y, +0.7% q/q), largely lifted by additional rental contribution from 20 Gul Way Phases 2E and 3, as well as 103 Defu Lane 10. Leases renewed during the quarter also helped increase weighted average rental by 5.9%.

However, NPI grew at a slower pace to $20.2m (+3.7% y/y, -0.5% q/q), dragged by higher property expenses after 11 Changi South Street 3 and 1 Kallang Way 2A were converted to multi-tenancy properties following the expiry of master leases.

Overall occupancy ticked up 0.3ppt q/q to 96.1%, staying above industrial average of 91%. Weighted average lease to expiry stayed at 3.11 years.

Aggregate leverage eased marginally to 31.2% (-0.2ppt q/q). During the quarter, the trust increased the proportion of its fixed rate debt to 96.1% from 86.2%, of which improved average cost of debt to 4.2% (-0.3ppt) but average debt tenor deteriorated to 2.9 years from 3.2 years.

For organic growth, the industrial REIT is redeveloping 30 and 32 Tuas West Road, from two detached three-storey buildings into a purpose build five-storey ramp-up warehouse facility. The $41.7m redevelopment has been 100% pre-committed by CWT and is expected to raise its annual rental income by four-fold to $4.15m.

Externally, management is not sanguine about near term industrial property outlook amid slowdown in global economic growth. In addition, excess supply projected to come on stream in the next twelve months will further depress rentals and occupancy.

Following its results announcement, its share price retreated 1.3%. AIMS AMP currently trades at an annualised 1Q16 yield of 7.4% and P/B of 1x.

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