Recovery on Track; Raise DPU & Target Price

• We raised DPUs by 0.5-2% on its recent Australian deal and following in-line 1Q20 - DPU was flat, but on better occupancies. AIMS APAC REIT (SGX:O5RU) has been active on leasing and AEI, but we expect negative reversions to persist in the near term – from earlier over-supply and unwinding of CWT’s master leases.
• DPU recovery is on track, while redevelopment growth optionality from its under-utilised GFA continues to offer 4-5% potential upside risk.
• Valuations are undemanding at 7+% DPU yield and 16% total return to our revised DDM-based SGD1.60 Target Price (COE: 7.8%, LTG: 1.5%).

In Line; Improved Occupancy

• AIMS APAC REIT's 1Q20 revenue increased 5.8% y-o-y with higher rentals and recoveries at 20 Gul Way and 27 Penjuru Lane.
• Portfolio occupancy rose from 94.0% to 94.7% while rental reversions at -0.1% improved from -5.8% in 4Q19, in line with a stabilising industrial market. Management signed 16 new and renewed leases for 31,630 sqm or 2.2% of its NLA and aims to backfill leases contributing 19-27% pa to expiries over FY20-22.
• Its exposure to CWT at 8.8% of gross rental income is expected to fall as leases expire in 2HCY19, mostly at 20 Gul Way.

Lower AEI on Track

• A 10-year master medical escalations and a 20-year SGD48.2m in development cost, which boosts 1.5x as plot 1H 2020.
• Meanwhile, AEI works at NorthTech in Woodlands is on track to complete in 2H 2019.

Boardriders Opportunistic

• AIMS APAC REIT completed the acquisition of Boardriders APAC HQ in Queensland for escalations. The property is fully-occupied debt-funded, thus adding 1-2% to our.
• We are hopeful that management will scale up on its overseas AUM, on the back of more favourable asset-level fundamentals.

Source: Maybank Kim Eng Research - 25 Jul 2019