• AIMS APAC REIT (SGX:O5RU) delivered a strong 3Q22 with DPU at +14.6% y-o-y/-6.0% q-o-q, underpinned by higher portfolio occupancy. Fundamentals are improving on the back of demand recovery, which suggests a stronger rental reversion outlook for FY23E.
• AIMS APAC REIT’s income visibility has been strengthened by the Woolworths acquisition, with a longer WALE at 4.85 years (from 3.98 years) and weighted average land lease expiry at ~57 years (from ~45 years).

Stronger Revenue, NPI, Better Reversion in FY23E

• AIMS APAC REIT's revenue jumped 13.5% y-o-y/10.1% q-o-q while NPI rose 14.8% y-o-y/ 9.9% q-o-q in 3Q22, with contribution from Woolworths HQ (from 15 Nov 2021), and higher income from 20 Gul Way, 27 Penjuru Lane, and 541 Yishun Industrial Park A (with the commencement of a new master lease in Jan 2021).
• Leasing momentum was strong at ~48k sqm or 6.1% of portfolio NLA, and were concentrated at its logistics assets, with ~84% driven by renewals. The portfolio rental reversion of +0.2%, from +2.1% in 2Q22, is in line with our expectation; and we see it improving into FY23E.

Higher Occupancy, Leasing Momentum

• AIMS APAC REIT's portfolio occupancy continued to trend up; it rose to 97.6%, from 97.3% in 2Q22 and 95.7% in 1Q22, above the 90.1% Singapore market average. We believe the improvement was broad-based, with a similar read-across from peers.
• Leasing enquiries are picking up against a backdrop of recovering demand fundamentals, and we expect vacancies to remain low, especially for its logistics and warehouse assets, which made up ~42% of 3Q22 gross rental income.

AUM Up From Australian Assets

• Leverage rose to 37.3% (from 24.7% as at end-Sep 2021), following the completion of the Woolworths HQ DPU yield, and 0.7x P/B. BUY.

Source: Maybank Kim Eng Research - 27 Jan 2022