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Wednesday, July 01, 2020

Ascendas India Trust Analysis @ 1 July 2020

Basic Profile & Key Statistics
Ascendas India Trust (AIT) is not a REIT, it is listed as Business Trust which own majority properties in IT parks. AIT has been running similar to SREITs which distribute 90% of distributable income. Current market cap is S$ 1.47 billions which is around 15% higher than SREITs median. AIT has the same sponsor as Ascendas REIT, which is Capitaland.

Lease Profile
AIT occupancy is high at 99%. WALE is slightly shorter at 3.6 years. Do note that AIT only provide WALE weighted by NLA instead of GRI. After checking with investor relation and verifying with 2019 Annual Report, its floor area and GRI is actually quite similar. Its income is received in Indian Rupee, thus posts forex risk. Currency hedging could not provide protection for long term currencies deprecation. All of its properties are freehold. 

Debt Profile
Gearing is healthy at 28%, however, business trust has no restriction on gearing. Cost of debt is high at 5.9% which is normal in India. Fixed rate debt is high at 81% and its unsecured debt is 100%. Interest cover ratio of 4 is slightly lower than SREITs median. WADE is short as well. Highest debt maturity amount to around 32% will be expired in FY2022, posts a slight concentrated debt maturity risk.

Diversification Profile
AIT properties is geographical diversified into 5 different states. However, its top property revenue is high at 39% of GRI. Both its top tenants and top 10 tenants are lower than SREITs median.

Key Financial Metrics
Property yield is high at 8.3% which is able compensate high cost of debt. Management fees over distribution is at the high side, which translate into S$ 5.80 dividend for every dollar paid. Distribution margin is slight low at 45%, it has improved a lot as compared to 2015 at only 35%.

DPU & NAV Trend
Both DPU and NAV per unit are on uptrend, which is a desirable trend by investors.

Fundamental Valuation
 Favorable Less Favorable
 Occupancy WALE
 All freehold properties  Income Received in Indian Rupee 
 Gearing Cost of Debt
 Unsecured debt WADE
 Top Tenant Management Fee
 Property Yield 
 Increasing DPU 
 Increasing NAV per unit 
Looking at its fundamentals, I believe management has proved its capability. AIT is quite aggressive in property acquisition, which should continue to improve its fundamentals. 

Relative Valuation
i) Average Dividend Yield
As AIT did not declared DPU for last quarter, dividend yield of 6.67% is based on annualized DPU for past 1 year. Apply annualized DPU of 8.6 cents to average yield of 6.03% will get S$ 1.43.
ii) Average Price/NAV 
Average value is at 1.35, apply latest NAV of S$1.09 will get S$ 1.47

Author's Opinion
At this point of time, there is no information on the impact of COVID to its earning. We will have to wait for its coming financial statement to know. For valuation:
i) Fundamental Intrinsic Value = (Removed)
ii) Relative Valuation - Dividend Yield = S$ 1.43
iii) Relative Valuation - Price/NAV = S$ 1.47
At current price of S$ 1.29, it is considered undervalue in term of fundamental and relative valuation.

*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. High forex risk BT. Dividend yoyo up and down. Cost of debt is ridiculously high. Country also high, see what happen to Singtel and RHT. Not vested.

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    Replies
    1. Yes. The forex risk and cost of debt I did mentioned in the negative points. Investor to do own due diligence

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