AIMS APAC REIT Review @ 27 October 2022

Basic Profile & Key Statistics

• Main Sector(s): Logistics, Industrial & Office
• Country(s) with Assets: Singapore & Australia
  
• No. of Properties (exclude development/associate/fund): 29

Key Indicators

Performance Highlight

Gross revenue and NPI increased mainly due to contributions from the Woolworths HQ that was acquired in November 2021 and higher rental and recoveries from existing properties. However, higher income was offset by higher operating expenses, distributions to Perpetual Securities holders, higher interest expenses and management fees, resulting in a slight improvement in distribution to unitholders. DPU improved marginally if excluding the one-off reversal of rental relief provision in 1H FY22.

Rental Reversion

Rental revision for the latest quarter is at 6.2%, while for 1H is at 8.1%.

Asset Enhancement Initiative

AAREIT would install large-scale rooftop solar systems for 6 Singapore properties by December 2023.

Sensitivity to Interest Rate

For every 0.25% interest rate increase, DPU impact would be 0.08 cent per annum, approximately 0.85%.

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 10%
• Highest lease expiry within 5 years: Below median for more than 10%; Falls in FY24
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: ± 10% from median
• Gearing ratio including perps: Above median for more than 20%
• Cost of debt: Above median for more than 10%
• Fixed rate debt %: Above median for more than 10%
• Unsecured debt %: Below median for more than 20%
• WADM: Above median for more than 20%
• Highest debt maturity within 5 years: Above median for more than 20%; Falls in FY27
• Interest coverage ratio: Below median for more than 20%

Diversification Profile

• Top geographical contribution: Above median for more than 20%
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: Below median for more than 10%
• Top tenant contribution: Above median for more than 20%
• Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

• Property yield: Above median for more than 10%
• Management fees over distribution: Above median for more than 20%; $4.24 distribution for every dollar paid 
• Distribution on capital: Below median for more than 10%
• Distribution margin: Below median for more than 20%

Trends

• Uptrend: Occupancy
• Flat: NAV per Unit 
• Downtrend: DPU, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

Relative Valuation

• P/NAV: Below -2SD for 1y; Below -1SD for 3y & 5y
• Dividend Yield: Above +2SD for 1y; Above +1SD for 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
High REIT Manager's Shareholding	Short Weighted Average Land Lease Expiry
High Directors of REIT Manager's Shareholding	High Perpetual Securities %
High Occupancy	High Cost of Debt
Long WALE	Low Unsecured Debt %
Well Spead Lease Expiry	Concentrated Debt Maturity
High Fixed Rate Debt %	Low Interest Coverage Ratio
Long WADM	High Top Geographical Contribution
Low Top Property & Top 5 Properties Contributions	High Top Tenant & Top 10 Tenants Contributions
High Property Yield	Non Competitive Management Fees
Occupancy Uptrend	Low Distribution on Capital
	Low Distribution Margin
	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

Gross revenue, distributable income and DPU have improved as compared to the previous quarter. For debt maturity, AAREIT has no debt maturity in FY23 and only 3.7% of borrowing maturing in FY24. Coupled with the 88% borrowing at a fixed rate, the impact of interest rate hikes should be minimal. However, the low adjusted interest coverage ratio of 2.5 and down-trending metrics should be something to take note of.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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REIT Investing Community - Facebook Group where members share and discuss REIT topic

*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.