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AIMS AMP Capital Industrial REIT: Revised DPU and fair value.

Saturday, December 11, 2010

This perhaps comes a bit late, the result of my blog being a one man show. Reading the Market Update dated 23 November, "Sale of 23 Changi South Avenue 2 Singapore above book value" which is expected to be completed by January 2011, I went and found out how much this property contributed to the REIT's rental income for the year ended 31 March 2010.  It was S$1.4549 million.  This is 3.49% of total income for the year ended 31 March 2010.

Doing some back of the envelope calculation, prior to the rights issue for the purchase of 27 Penjuru Lane, the DPU was 2.15c.  Post rights and acquisition, the estimated DPU was given as 2.08c.  If we remove 3.49% from the DPU of 2.15c, that would give us 2.075c.  So, post rights and acquisition, we would get a DPU of approximately 2c.

As the sale of 23 Changi South Avenue 2 will be completed only in January 2011, its contribution to rental income for the quarter October to December 2010 is unaffected.  With the contribution from 27 Penjuru Lane coming in, I expect the income distribution that would take place in March 2011 to be 0.52c per unit as per guidance.  For subsequent quarters, it should be about 0.5c per unit, everything else remaining constant.

However, with a bigger cash balance on hand, I fully expect the REIT's management to do some asset enhancement to increase lettable space for properties which have not maximised their plot ratios or to make new acquisitions which are NPI yield accretive in nature.  The former would be easier than the latter, I suspect, given the strong recovery in real estate values in Singapore.

At the revised DPU of 2c, the REIT still provides an attractive distribution yield of 9.3% at a unit price of 21.5c which is where I hope to load up more. There are still more positives about this REIT and there is probably more upside than downside in the next 12 months. After revising the annualised DPU to 2c and expecting the REIT to trade at an 8% yield, the fair value I ascribe to the REIT is now 25c /unit.

Note that I did not take into consideration the other positive developments in the Market Update which is the 100% occupancy achieved for 15 Tai Seng Drive (85.7% as of 31 March 2010) and 23 Tai Seng Drive (84% as of 31 March 2010).  Conservatively, this should add about $400,000 to the REIT's annual rental income.

Read Market Update.

Related posts:
AIMS AMP Capital Industrial REIT: 2Q FY2011


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