• 2QFY20 DPU in line; operationally robust outlook bodes well for the Ascendas India Trust.
• Myriad of opportunities to tap on to grow inorganically.
• Ability to tap on Sponsor’s focus and intention to deploy capital in India.
• Maintain BUY, Target Price raised to S$1.65.

One of the Fastest-growing S-REITs

• We maintain our BUY call on ASCENDAS INDIA TRUST (a-iTrust, SGX:CY6U) with a higher Target Price of S$1.65 as we roll forward our valuation. We believe its expansion into modern warehouses since last year heralds a new leg of growth, and coupled with its Sponsor’s focus to double its footprint in India, these bode well for Ascendas India Trust. BUY!

Another Stellar 2QFY20 Result – in Line

• Ascendas India Trust delivered yet another very strong set of results with 2Q20 DPU up 15% y-o-y to 2.28 Scts (INR terms: +16% to INR1.17). The robust result was in line with expectations with 1H20 DPU representing 52% of our FY20F DPU.
• See Ascendas India Trust Announcements; Ascendas India Trust Dividend History.

Boost From Rental Reversions and Past Investments; Organic Growth Outlook Remains Bright

• The robust DPU was on the back of an 18% y-o-y increase (+3% q-o-q) in net property income (NPI) to S$39.0m as Ascendas India Trust benefited from the completion of Anchor building (formerly known as MTB4) at ITPB, higher income from aVance in Pune, and positive rental reversions achieved in the quarter.
• Organic growth remains on an upward trend with its properties in Bangalore, Hyderabad, Chennai and Pune delivering 7%, 2- 24%, 10-37% and 9% increase in transacted and effective rents. The strong uplift holds much promise as the REIT will be looking to renew 15% of its leases in 2020, of which close to 40% are from Chennai which we believe will see the strongest upward trajectory in rental reversions.
• Overall portfolio committed occupancy now stands at 99%. 2Q20 DPU continued to enjoy tailwinds in the form of higher interest income as Ascendas India Trust had provided construction financing for the development of AURUM IT SEZ, aVance 5 & 6, and Vance A1 & A2.

Uptick in Gearing

• On the back of Ascendas India Trust’s investments, gearing remained at 33% at end-Sept19. Borrowing cost dipped slightly to 6.0%, from 6.2% a quarter ago.

Visible Pipeline; Sponsor With a Focus on “doubling India Investments” Puts A-iTrust in the Spotlight

• We remain excited by Ascendas India Trust’s concrete plans to grow its AUM through unique forward purchase agreements and redevelopment plans. These plans would lead to total floor area increasing by 73% to 22.6m sqft when executed on, and the manager has committed to fund investments of almost S$970m (out of which another S$700m will be deployed over the coming 2-3 years).
• The manager is also in preliminary discussions with owners on potentially expanding into data-centres or converting a number of properties within its portfolio into data-centres.
• Furthermore, Ascendas India Trust remains on the forefront as the key vehicle of the group’s (CAPITALAND LIMITED (SGX:C31)) plans to double its exposure in India over the medium term. With the Sponsor’s capital backing, the future remains bright for Ascendas India Trust. In the near term, the manager is seeing a robust pipeline of third party opportunities (income producing and forward purchase agreements) which it remains keen to tap on.

Where We Differ: Above-consensus Growth

• We see a myriad of growth opportunities for Ascendas India Trust. Firstly, its expansion into the modern Indian warehouse sector warrants a premium not only from the boost to Ascendas India Trust’s near-term DPU outlook but more importantly, the ability to accelerate earnings growth in the medium term.
• Its pipeline of forward purchase projects will also boost its GFA by over 73% in the medium term. In the longer term, the continued execution of its landbank at ITPB (Bangalore) and The V (Hyderabad) offer opportunities to extract value for unitholders.

Source: DBS Research - 25 Oct 2019