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Sunday, June 28, 2020

AIMS APAC REIT (Previously AIMS AMP REIT) Analysis @ 28 June 2020

Basic Profile & Key Statistics
AIMS APAC REIT (AAREIT) managed properties in multiple sectors of Logistics, Industrial and Office. As of now, AAREIT is maintaining its quarter distribution & financial reporting policies amid the recent change in SGX rule. Current dividend yield (TTM) is at 7.66% and P/NAV is at 0.92. With market cap of $ 880 millions, it is relative small as median market cap for SREITs at this moment is S$ 1.25 billions.

Lease Profile
Occupancy is at the low side due to the transition of master leases to multi-tenancy leases at 1A International Business park and 20 Gul Way. Committed WALE is good at 4.3 years. Highest lease expiry fall in the FY2022 at 25.4% of GRI, thus does not poses highly concentrated lease expiry risk. As majority of properties is based in Singapore, short weighted average land lease expiry is expected.

Debt Profile
Gearing is healthy at 34.8% which shouldn't change much from this moment as properties valuation was done at quarter ended 31 March 2020. Cost of debt of is at the high side despite low unsecured debt. With high fixed rate debt of 81.1%, AIMS APAC REIT would not benefits much from current low interest environment. Due to recent COVID outbreak, high fixed debt rate suddenly became a less favorable point. Interest cover ratio is healthy. WADE is slightly short at 2.4 years, however, it has received commitment from lender to refinance, pro forma WADE would increase to 3.3 years.

Diversification Profile
AIMS APAC REIT received majority of GRI from its Singapore properties, which is less geographical diversified. Flagship properties contribute 14.7% of GRI, which is lower than SREITs median. Both top tenant and top 10 tenants contribution are higher than SREITs median.

Key Financial Metrics
Property yield is quite high at 6.9%. Management fee is low at 11.5%, which mean for every dollar REIT's manager received, unitholders received $8.70 dollar of dividend. Distribution margin is slightly below median level of 50%.

DPU & NAV Trend
For the past 5 years, both DPU and NAV per unit are on downtrend. Although the trend is more or less stabilized at 2018, this is still worrying. In fact, this downward trend is faced by a lot of SREITs.

Fundamental Valuation
Let's sum up the Fundamental part as compared to SREITs median:
Favorable Less Favorable
Sector Diversification Occupancy
WALE Weighted Average Land Lease Expiry
WADE (based on pro-forma) Cost of Debt
Gearing Unsecured Debt
Top Property Contribution Top Geographical Contribution
Property Yield Top Tenant
Management Fees over Distribution Top 10 Tenants
Distribution on Capital  

As per my previous post on Quantifying REITs Fundamental and REITs Valuation, I believe every REIT has an intrinsic value to its fundamental, be it fundamental strong or weak. Also, there won't be any fundamental perfect REIT, there will sure be some points which are least favorable.

Relative Valuation
i) Average Dividend Yield
Average value at 7.53%, apply full year DPU of 9.5 cents will get S$ 1.26. However, if we consider DPU without retention due to COVID situation, full year DPU would be 9.9 cents, which translate into S$ 1.31.    
ii) Average Price/NAV 
Average value is at 0.99, apply latest NAV of $1.351 will get S$ 1.34

Author's Opinion
There are certainly some numbers of plus points and negatives points for AIMS APAC REIT. As mentioned above, there is no perfect REIT. If we compare different valuation method mentioned above, we will get the following:
i) Fundamental Intrinsic Value = (Removed)
ii) Relative Valuation - Dividend Yield = S$ 1.31
iii) Relative Valuation - Price/NAV = S$ 1.34
At current price of S$ 1.24, it is considered slightly undervalue. However, as a REITs investor, dividend should be the main focus; price upside should only be treated as a bonus. As fundamental and price relative metrics changed from time to time, it is important for investor to follow closely and re-analyze from time to time.

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness and reliability. It should not be taken as financial advise or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of use of material in this blog. Please always do you own due diligence before any decision is made.

2 comments:

  1. Agree ���� Its tenancy includes hitech buildings too, which should be well protected by gov policies

    ReplyDelete
    Replies
    1. not really diversified enough in term of tenant

      Delete