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Sunday, August 09, 2020

AIMS APAC REIT Analysis @ 9 August 2020

Basic Profile & Key Statistics

AIMS APAC REIT (AAREIT) invests in Logistics, Industrial and Business Park properties in Singapore and Australia.


Lease Profile

Occupancy is healthy at 93.6%. WALE is slightly long at 4.41 years where highest lease expiry within 5 years is at 26.2%, falls in FY2022. Weighted average land lease expiry is short at 41.92 years.


Debt Profile

Gearing is healthy at 35.4%. Cost of debt is high at 3.3% despite low unsecured debt at 26.4%. Fixed debt is moderate at 81.1%. Interest cover ratio is moderate at 3.8 times. WADE is short at 2.2 years and the highest debt maturity of 28.9% falls in FY2021. From the latest presentation, AAREIT has executed a supplemental agreement to refinance its loan, the pro forma WADE is slight long at 3.1 years, and the highest debt maturity of 39.3% falls in FY2025. 


Diversification Profile

AAREIT is not diversified in terms of geographical and tenant but is diversified in terms of property. Its top geographical, top property, top tenant and top 10 tenants contribute 88.6%, 14.4%, 13.2% and 50.2% respectively.


Key Financial Metrics

Property yield and distribution on capital are high at 6.5% and 4.2%. Management fee is competitive in which unitholders receive S$8.06 for every dollar paid. Distribution margin is moderate at 48.5%.


Related Parties Shareholding

Sponsor and manager holding lesser stake than SREITs median level while directors of REIT manager holding more stake than SREITs median level.


Trend

Both DPU and NAV per unit are on a downtrend but has seen stabilized from year 2017. Distribution margin is more or less the same for past 5 years.


Relative Valuation

i) Average Dividend Yield  - Apply past 4 quarters DPU of 9 cents to average yield of 7.5% will get S$ 1.20

ii) Average Price/NAV - Average value is at 0.99, apply the latest NAV of S$1.36 will get S$ 1.35.


Author's Opinion

Favorable Less Favorable
Diversified Sector Weighted Average Land Lease Expiry
Top Property Contribution Cost of Debt
Property Yield Unsecured Debt
Management Fee Concentrated Debt Maturity (Pro Forma)
Distribution on Capital Top Geographical Contribution

Top Tenant & Top 10 Tenants Contribution

AAREIT just recently announced to issue perpetual securities of S$ 125 mils @ 5.65%. The manager mentioned that the proceed would be used to finance the general working capital, capital expenditure and investments, and the partial or full refinancing of existing borrowings. However, from the latest presentation, AAREIT also mentioned has entered into a supplemental agreement with existing lenders to refinance existing loan and no debt due until November 2021. There are around S$ 152.8 mils undrawn debt facilities  (after minus the repayment of S$ 31 mils debt due to November). So why do AAREIT require the S$ 125 mils? Whether has something happened to the refinance agreement or some agenda to be announced in the near term? We could only wait and see.

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*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 advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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