• a-iTrust 1Q19 DPU of 1.60 Scts (+23% y-o-y) in line with our expectations.
• Boost from continued increase in rents and recent acquisitions/developments.
• A 653,000 sqft building to be built in Bangalore, further strengthening the already healthy development pipeline.
• Maintain BUY, Target Price of S$1.25.

What’s New

1Q19 DPU jumps 23% y-o-y despite currency headwinds

Ascendas India Trust (a-iTrust) had a stellar start to FY19, with 1Q19 DPU jumping 23% y-o-y to 1.60 Scts which was in line with expectations.

1Q19 DPU would have been stronger if not for the depreciation of the INR versus SGD with 1Q19 DPU in INR terms increasing by 33% y-o-y.

The strong results were largely due to the impact of positive rental reversions in prior quarters as well as contribution from investments and acquisitions made over the past year (Atria, Arshiya warehouses, AURUM IT SEZ, and aVance 5&6). This also resulted in revenue and NPI in INR terms increasing by 6% and 20% y-o-y respectively. However, we highlight that as a-iTrust is phasing out the Dedicated Power Plant at ITPB, utilities income fell in 1Q19 and will drop in the quarters ahead, negatively impacting overall revenue that a- iTrust reports.

Overall committed portfolio occupancy remains healthy at 96%, up from 95% at end 4Q18. The improvement was mainly driven by higher occupancies at The V (100% vs 93% at end 4Q18) and Blueridge (87% versus 81% previously).

Strong balance sheet maintained

a-iTrust remains in a strong financial position with gearing at 31%, providing sufficient debt headroom to fund its announced acquisitions and investments.

Meanwhile, average cost of debt was lower at 5.5%, down from 6.3% at end 31 March 2018. Management guided that the decrease is temporary as there was a short-term increase in the proportion of SGD debt as a- iTrust draws down on short term revolving facilities to fund the investments in AURUM IT SEZ and aVance 5&6. Consequently, the proportion of fixed rate debt also fell to 73% from 86% previously.

Expands development pipeline

In conjunction with its 1Q19 results, a-iTrust announced that it is planning to build a 653,000 sqft building at ITPB called MTB 5. Construction is expected to commence in 1HCY18 with targeted completion in 2HCY20. a-iTrust has already secured a leading IT services company to lease 100% of the building. This addition further expands a-iTrust’s already healthy development pipeline.

Combined with its other developments, total floor area will increase by 44% to 18.1m sqft over the next few years.

Maintain BUY, Target Price of S$1.25

We maintain our BUY call with Target Price of S$1.25.

We continue to like a-iTrust for its visible development pipeline and favourable near term demand supply fundamentals in its key markets. This estimate will translate to DPU CAGR of 13% p.a. over the next 3 years.

Source: DBS Research - 26 Jul 2018