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Thursday, October 14, 2021

AIMS APAC REIT Review @ 14 October 2021

Basic Profile & Key Statistics

AIMS APAC REIT (AAREIT) is a diversified REIT that invests in Business Park, Industrial, Logistics properties. AAREIT owns 28 properties in Singapore and Australia.

Performance Highlight

Gross revenue, NPI, distribution and DPU have increased YoY mainly due to contribution from 7 Bulim Street, higher rental for the properties at 20 Gul Way, 8 & 10 Pandan Crescent and 541 Yishun Industrial Park A. 

Rental reversion for 2Q FY22 is at 2.1%.

On 30 Sep, AAREIT announced the proposed acquisition of Woolworths HQ. It is a freehold business park with 5.17% NPI. The acquisition would be funded by a combination of debt and proceeds from perpetual securities. Manager may consider issuing new equity as well, however it is yet to be firmed.

The acquisition is expected to be DPU accretive but dilutive to NAV per unit.

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 5.312%
  • REIT manager's shareholding is low at 0.712%
  • Directors of REIT manager's shareholding is high at 8.115%

Lease Profile

  • Occupancy is slightly high at 97.3%
  • WALE is moderate at 3.98 years
  • Highest lease expiry within 5 years is moderate at 25.3% which falls in FY24
  • Weighted average land lease expiry is short at 40.89 years

Debt Profile

  • Gearing ratio is low at 24.7%. Include perps, gearing is at 44.5%.
  • Cost of debt is high at 2.8%
  • Fixed rate debt % is high at 98.1%
  • Unsecured debt % is low at 31.9%
  • WADM is short at 2.1 years (slightly low at 2.7 years on pro forma basis)
  • Highest debt maturity within 5 years is high at 47.5% which falls in FY25
  • Interest coverage ratio is high at 4.5 times
  • Preferred/perpetual securities over debt is high at 44.5%

Diversification Profile

  • Top geographical contribution is high at 86.3% 
  • Top property contribution is low at 13.1% 
  • Top 5 properties contribution is low at 43.3% 
  • Top tenant contribution is high at 13% 
  • Top 10 tenants contribution is high at 47.4%

Key Financial Metrics

  • Property yield is high at 6.2%
  • Management fees over distribution is slightly low at 12.8 % in which unitholders receive S$ 7.81 for every dollar paid 
  • Distribution on capital is high at 4%
  • Distribution margin is slightly low at 46.6%

Trends

  • Flat - NAV per Unit
  • Slight Downtrend - Property Yield
  • Downtrend - DPU, Interest Coverage Ratio, Distribution on Capital, Distribution Margin

Relative Valuation

  • P/NAV - High than average for 1y, 3y & 5y, close to +1SD for 1y & 5y
  • Dividend Yield - Average for 1y; Below -1SD for 3y & 5y

Author's Opinion

FavorableLess Favorable
Diversified SectorLow REIT Sponsor's Shareholding
High Directors of REIT Manager's ShareholdingLow REIT Manager's Shareholding
Low Gearing RatioShort Weighted Average Land Lease Expiry
High Fixed Rate Debt %High Cost of Debt
High Interest Coverage RatioLow Unsecured Debt %
Low Top Property & Top 5 Properties ContributionsConcentrated Debt Maturity
High Property YieldHigh Perpetual Securities %
High Distribution on CapitalHigh Top Geographical Contribution
 High Top Tenant & Top 10 Tenants Contributions
 DPU Downtrend
 Interest Coverage Ratio Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

AAREIT performance has improved as compared to the previous quarter.  This quarter DPU is back to 2.5 cents as per pre-COVID period even with manager's management fees paid in cash. The upcoming performance of AAREIT is expected to be improved with the acquisition of Woolworths HQ. However, there is still no update for the acquisition of  315 Alexandra Road which was announced in January. With the recent perpetual securities issued, AAREIT currently has the highest perpetual securities to total debts ratio (total debts = borrowings + perpetual securities) among Singapore REITs.


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and 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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