Improving DPU, Portfolio Metrics

• AIMS APAC REIT (SGX:O5RU) delivered a strong 2Q22, with DPU up 25% y-o-y/11% q-o-q, underpinned by better portfolio occupancy and rental reversion. Fundamentals are improving with buoyant logistics demand (~50% of gross rental income).
• We raised FY23-24 estimates by 2% on stronger rental growth assumptions, and raised our DDM-based target price for AIMS APAC REIT to S$1.65 (COE: 7.4%, LTG: 1.5%).
• The Woolworths’ acquisition, set to complete in two weeks, should lift its Australian contribution from ~22% to ~38% of AUM, boost DPUs by 4-5%, and strengthen income visibility. For now, AIMS APAC REIT's valuations are undemanding at 6.7% FY22E DPU yield, and 1.0x P/B. BUY.

Recovery in Revenue, NPI, on +2.1% Rental Reversion

• AIMS APAC REIT's revenue jumped 9.6% y-o-y / 5.1% q-o-q, while NPI rose 15.5% y-o-y/ 6.7% q-o-q in 2Q22. Its 1H22 revenue and NPI at +13.0% y-o-y and +19.4% y-o-y respectively, was driven by the rental contribution of 7 Bulim Street (acquired in Oct 2020), as well as higher revenue from 20 Gul Way, 8 & 10 Pandan Crescent, and 541 Yishun Industrial Park A (with the commencement of a new master lease in Jan 2021).
• The portfolio rental reversion of +2.1%, from +0.4% in 1Q22, is in line with our expectations; and we see it improving into 2H22.

Better Occupancies, Underpinned by Demand Growth

• AIMS APAC REIT's portfolio occupancy rose to a backdrop of recovering demand fundamentals.

AUM Up From Australian Assets

• AIMS APAC REIT's leverage was lower at 315 Alexandra Road (expected before end 2021).
• AIMS APAC REIT's balance sheet remains sound, and we expect management could look to add further in its core markets.

Source: Maybank Kim Eng Research - 13 Oct 2021