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The numbers for 1Q FY2014:
DPU: 2.5c (payable on 20 Sep)
NAV/unit: $1.50
Leverage: 25.4%
Interest cover ratio: 5x.
The DPU of 2.5c represents 99.4% of distributable income per unit. DPU would have been 2.78c if the share placement at $1.60 a unit did not take place in May 2013. Bummer.
However, the share placement resulted in a stronger balance sheet which is prudent as the REIT embarks on redeveloping 103 Defu Lane 10 and Phase 2E & 3 of 20 Gul Way.
As a result of having more cash, higher property valuations and much lower debt of $279.0m which is reduced from $359.3m three months ago, leverage lowered from 34% to 25.4%.
Without asking unit holders for more money, the REIT's DPU is expected to increase in the next two years as:
1. Phase 2 of 20 Gul Way was completed seven months ahead of schedule and will contribute to income starting this quarter.
2. 103 Defu Lane 10 and Phase 2E & 3 of 20 Gul Way are likely to be completed in 2014.
OSK DMG estimates that DPU in 2015 upon completion of the projects mentioned will approximate 13.3c, everything else remaining equal.
See presentation: here.
Related post:
AIMS AMP Capital Industrial REIT: Interview with CEO.
Bloggy Award
7 comments:
Erratum:
DPU of 2.50c consists:
(i) an advanced distribution of 0.85c per unit for the period from 1 April 2013 to 1 May 2013 which was paid on 18 June 2013
and
(ii) a distribution of 1.65c per unit for the period from 2 May 2013 to 30 June 2013 to be paid on 20 September 2013.
“The Trust’s portfolio continued to achieve positive rental reversion which will contribute positively to distributions in the coming quarters.
We secured 31 leases (new and renewal) this quarter representing 5.6 percent of our portfolio’s lettable area and achieved a weighted average increase of 14.2 percent on these renewals.”
“For the next quarter, additional rental income from the completed Phase Two of 20 Gul Way will boost distributions further,” Mr McGrath said.
... further development of 20 Gul Way ... is expected to generate
additional S$6.3 million in annual rental income...
The Trust’s existing capital structure is well positioned with no debt due for refinancing until October 2015, a weighted debt maturity of 3.0 years and with 100 percent of its debt fixed for a weighted average of 2.9 years.
Source:
http://files.shareholder.com/downloads/AMDA-KG5GW/2601719556x0x679269/780d24dd-6a7e-44a0-adeb-c2c315a355d1/679269.pdf
Although this was a stellar quarter for AAREIT, DPU was diluted as a result of the recent SGD110m placement in April.
During this quarter, the trust achieved T.O.P for Phase Two of 20 Gul Way, approximately seven months ahead of schedule and within budget. As a result, rental payments is expected to commence in July (c. SGD1.1m), hence in turn boosting next quarter’s earnings.
In addition, 103 Defu Lane, Phase 2E and Phase Three at 20 Gul Way are scheduled to be completed by 2HFY15. In view of such strong growth prospects, we have maintained BUY on AAREIT with a slightly higher DDM-based (COE:8.7%; TGR:2.0%) TP of SGD1.81.
- Pang Ti Wee
Hi AK
Understand you have a sizeable position in this, which means you have studied this in great details. :)
What's your view on the price level to buy at? Similarly for Sabana? Thanks.
Busta
Hi Busta,
I think you must have done thorough research as well. So, if you are comfortable with sharing your views, I am sure readers will be interested to listen in. :)
I didn't continue buying First REIT because I thought at one time that 80c was its fair value. At that price and its projected DPU, distribution yield was 8%. LOL.
See:
First REIT: XR and fair value.
To my delight, Mr. Market felt that I was wrong. ;p
Will I buy more now? Well, I don't get the feeling that it is undervalued now. So, no.
As for Sabana REIT, I wrote a piece recently: Sabana REIT: 2Q 2013.
I think that Mr. Market has discounted the REIT too severely. Even at $1.20, distribution yield is a very attractive 8%. Its other numbers are in line. Nothing alarming.
I believe the discount is because it has a few Master Leases expiring in November which it has yet to renew. In the worst case scenario, these leases will go unrenewed and the REIT will have almost 8% of vacated space. Hardly catastrophic. It could even be a blessing because industrial rents have escalated in the last 3 years.
I think for anyone who can accept an aggregate of almost 40 years lease and a worst case scenario of 7.2% distribution yield, Sabana REIT seems like a safe investment even at $1.20 a unit.
Hi Busta,
Oops. I made a boo-boo. LOL.
I read your comment on First REIT earlier and simply assumed that this was a continuation. Sheesh. Sleepy head. ;)
OK, with regards to AIMS AMP Capital Industrial REIT, DPU is set to grow. I might be getting ahead of myself but it is like a mini A-REIT as it has been going into redevelopments and AEIs. Very promising.
Based on what is already in the pipeline, I feel that a 20% increase in DPU in the next two years is not unrealistic. So, at $1.60 a unit, we are looking at a potential distribution yield of 7.5% which is pretty decent.
Since I already have a big position in this REIT, I am in no hurry to add. If Mr. Market should sell it down further to below its NAV/unit, I think I would.
Hi AK
No worries, I was indeed asking about AAReit but good to also hear your view on First Reit. :)
I'm looking to buy a bit more on AAReit and Sabana in the coming weeks, and your insights are certainly helpful.
Thanks for your help!
Busta
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