High Occupancy, Recovering Rents

• AIMS APAC REIT (SGX:O5RU)’s FY22 DPU rose 5.7% y-o-y, underpinned by resilient portfolio occupancy, recovering rents and the Woolworths acquisition in Nov’21. The results were in line with consensus, and ahead of our estimate.
• We see strong fundamentals ahead, given the higher Australian business park contributions and improving rental growth outlook for its Singapore industrial assets.

Improving Demand, Reversion Strong at +14.7%

• AIMS APAC REIT's portfolio occupancy was maintained at 97.6% in 4Q22, driven by strong leasing momentum at 5.9m sf (vs 6.1m sf in 3Q22). AIMS APAC REIT achieved a strong +14.7% rental reversion (vs +0.2% in 3Q22). llumina renewed its lease (at 29 Woodlands Industrial Park E1) for 10 years at a +16% reversion. This and others at 8 & 10 Pandan Crescent (at 4%-12%), helped to offset weaker reversion at 1A IBP (of -8%).
• Management expects NPI to be cushioned from higher utility costs, as they are mostly passed through to tenants for its triple-net leases.

Australian Contributions Set to Rise

• Contributions from its Australian assets rose to ~13% of FY22 revenue (from ~3% in FY21), and made up 39.6% of AUM (from 21.8%) following the Woolworths acquisition, while the portfolio WALE increased to 5.05 years (from 4.85 years at end-Dec 2021).
• We see sound growth fundamentals in Australia, with the assets anchored by its business parks (94% of Australian AUM). The properties are backed by resilient occupancies and built-in 2.75%-3.25% pa rental escalations for its two largest (blue-chip) tenants, which together contributed ~28% of gross rental income.

Sound Balance Sheet, Cushioned From Rising Rates

• AIMS APAC REIT's gearing was stable at 37.5% (vs 37.3% at end-Dec 2021) while borrowing cost fell to BUY.

Source: Maybank Research - 29 Apr 2022