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A DPU of 2.5c has been announced. The REIT goes XD on 2 Nov 2012 and the income distribution is payable on 20 Dec 2012.
Gearing is comfortable at 31.5%. This leaves ample debt headroom for further yield accretive initiatives.
The REIT now has a new source of funding via a $500m Medium Term Note Program. It issued a $100m 4 years 4.9% fixed rate notes due in August 2016. Being an unsecured facility, the cost of debt is dearer but if we should continue to see positive rental reversions, this is still acceptable.
Indeed, the REIT manager has not disappointed as they have been successful in renewing leases with higher weighted average rental with positive rental reversion of some 17.3%. They have also reduced concentration risk as the proportion of leases expiring by 2013 have reduced from 35.7% one year ago to 9.9%. Of course, it remains to be seen if they could secure positive rental reversions by renewing the 9.9% now remaining. Negotiations are in progress.
The management should also continue to work towards 100% occupancy although, at 99.2%, it is already above average for industrial properties in Singapore.
Average security deposit of 7.2 months per property provides a peace of mind.
In the papers, it is reported that distributable income reduced some 5.4% but on a quarter to quarter basis, the reduction is much lesser at 0.6%. So, I wouldn't be too worried.
Although gross property income improved some 3% quarter on quarter, NPI reduced 1.4% due to an increase of 13.9% in property operating expenses. This includes repair and maintenance of some properties which should be a one off expense. Having said this, the management should continue to be prudent in managing expenses.
See presentation slides: here.
See financial statement: here.
Related post:
AIMS AMP Capital Industrial REIT: 1Q FY2013.
Bloggy Award
24 comments:
Nice story on AA REIT. I was thinking of selling but glad I didnt do it.. will continue to hold them.. The next dividend will make a nice Christmas present.. ;-)
Hi Jay,
I am sure you are not the only to wonder whether to divest. :)
Personally, I did divest some but what is left is part of my core investments for income. So, I am unlikely to divest further unless distribution yield is compressed much more.
Merry Christmas in advance. ;)
Hi Ak71,
AIMS, Sabana, First, my top 3 choices for their solid managements.
However, at current prices, I can't go in.
Will wait until next year.
Hi INVS 2.0,
Well, with Sabana REIT, it is early days yet. Hard to say if the management is up to scratch. They have yet to address the lease expiry concentration risk I mentioned in the last two quarters.
I suspect that yield compression could be taking a breather now and unit prices could rise higher in time as cheap money becomes even more common. So, although I hope that unit prices would weaken as well so that I could buy more, I know it might not happen.
Hi AK,
I wished I had read your earlier post on AIMS before selling them at $1.36.
Lesson learnt for me is to consider the yield factor in deciding whether to divest.
AK
On existing holding, if bought at a lower price, should not be bothered by current-high-prices yield compression.
Divest to take profit is good but then at the current lower yields, are there any better dividends generous investment that we can park these funds at ?
Hi Ak71,
Don't worry. There might be a recession next year (it is predicted by economists and investors).
Hi rustydoodle,
Er... What did I say in my previous blog post that you wish you had read?
Was it this?
For anyone investing for income and thinking to continue doing so for another few years at least, the REIT's DPU is likely to increase some 15% by end of 2013.
I suppose you have divested fully? Stay on the look out for a chance to get back in. :)
Hi SnOOpy168,
All thoughtful remarks. Indeed, where to park our money for higher returns? Hmmm...
Hi INVS 2.0,
Oh, I am not worried at all. I am in a position to benefit from both bull and bear markets. ;)
Hi AK,
Yes, yield potential is one. Another is "If its unit price should strengthen more significantly as to compress distribution yield by much more, then, I would consider further divestment."
Yes, I had fully divested for AIMS.
Hehe, you can just call me Rusty. :D
Hi Rusty,
Ah, I see. Well, although I feel that the unit price of AIMS AMP Capital Industrial REIT is now fully valued, there is a chance the distribution yield could get compressed to the low 6%. Before that happens, lets hope for a correction so that you could buy in again. ;)
You have a very unique name. :)
Hi AK71,
I have always been an avid reader of your blog. Would like to seek your opinion on PCRT. The price has come down quite significantly and the yield is now >8%. What's your take on this share?
Thanks in advance.
Hi Desmond,
If you are going after yield, please bear in mind that PCRT could reduce distributions by half in 2013.
I have not blogged about PCRT recently but I have been updating an older blog post in the comments section. You might want to go through the comments section in:
PCRT: Weak debut?
I am vested at 47.5c/unit and believe that anyone who has an investment horizon of at least 3 years could be amply rewarded here. :)
Hi AK71,
Thanks for your advise on PCRT.
I am curious as to why you think PCRT distribution could be reduced in 2013. As more of it's properties become operational in 2013, shouldn't that contribute to a higher distribution instead?
Hi Desmond,
I believe that this was the guidance provided during IPO. The Trust could reduce distribution after the first two years. If it should continue with the current payout level, it would be on a voluntary basis.
PCRT is still growing and like CMA, patience is required before it is time to harvest. CMA's share price has moved up a lot from the lows almost a year ago compared to PCRT.
Of course, CMA is a behemoth and appeals more to institutional investors. PCRT could take a longer time to mature. An investment horizon of about 3 years is reasonable as that is when almost all its properties would be fully operational.
Hi AK71,
Thanks for taking the time to advise a newbie. Appreciated
Hi Desmond,
Just sharing my thoughts. You are welcome. :)
Hi AK,
AIMS has been correcting recently.
Do you think its because of the news of the issuing of new units?
HOw are you taking this move?
Thanks :)
Hi Ray,
I have been out of touch for a week. Thanks for highlighting this to me. :)
I have taken a look at the recent announcements. The issue of new units is for people who opted to reinvest their income distributions. Price: $1.4378/unit.
So, it means that unitholders who opted to reinvest their income distributions in the last quarter would be better off purchasing from Mr. Market at $1.37 today.
Well, although I believe that units of AIMS AMP Capital Industrial REIT should be worth more in time, its price has had a very strong run up and a correction in price is not unreasonable.
Not sure if anyone noticed this
______________________________
AMP Capital has reduced its unitholding in AIMS AMP Capital Industrial REIT (AA REIT) to 5.01 per cent and will retain its 50 per cent ownership of the management company responsible for the Singapore Exchange-listed REIT.
Today AMP Capital conducted two off-market transactions by way of institutional placements.
The first placement of 22,370,517 units representing a unitholding of 4.99 per cent was sold to an AMP Capital client which AMP Capital will continue to manage on behalf of the client.
The second placement of 19,277,199 units representing a unitholding of 4.30 per cent was widely distributed to institutional investors in an off-market transaction.
AMP Capital will continue to control 10.10 per cent in AA REIT as a result of its direct stake of 5.01 per cent, the 4.99 per cent AMP Capital manages on behalf of its client and the 0.10 per cent in other investment funds managed by AMP Capital which are all considered an associate for the purposes of substantial unitholding disclosure.
AMP Capital Chief Executive Officer Stephen Dunne said: “We have witnessed the transformation of AA REIT since 2009 when the AMP Capital seed pool1 made its initial investment as part of our strategy to create a new investment opportunity. During this time management has successfully built the strength and stability of the REIT nearly doubling its total asset value to S$975 million.
“We are very pleased with the performance of our AA REIT units and the consistent returns the AA REIT has delivered to its investors. Our decision to reduce our unitholding is consistent with our strategy to return funds to the seed pool for investment to establish new opportunities for our clients.
“As a sponsor, we will continue to support AA REIT management and are committed to retaining a long term interest,” Mr Dunne said.
AIMS AMP Capital Industrial REIT Chief Executive Officer Nicholas McGrath said: “We have achieved a great deal in the past three years thanks to the ongoing support of AMP Capital and unitholders. We rebuilt the REIT’s capital base, refocused and significantly grew the portfolio, undertook our first major redevelopment at 20 Gul Way, all while maintaining conservative gearing at an average of 30 per cent for 12 consecutive quarters.
“We believe a more diverse unitholder register reflects AA REIT’s maturity as a listed entity. We look forward to welcoming new investors onto our register,” Mr McGrath said.
Hi JCK,
I saw this last night. It should not have any material impact on the REIT's value or unit price.
A correction, if it should happen, would represent an opportunity to accumulate.
However, Mr. Market will do what Mr. Market does. ;)
Take profit & recycling their capital ? Good lah. a complete sell off may mean no confident.
Sound like they are expanding. New fund or some private institutional REIT like the Dragon thingy of ARA. Hmm, should they call it the kangaroo reits funds.
Hi SnOOpy168,
There is greater institional interest in the REIT now, for sure. AMP Capital has made a lot of money from the partial divestment and if a sophisticated investor is willing to pay the asking price, it says something about the REIT's attractiveness. :)
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