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AIMS AMP Capital Industrial REIT: 4Q FY2014.

Friday, May 9, 2014

Without the recent rights issue, DPU would have been 2.95c. A dilution of 15%, post rights, and we have DPU at 2.51c.

I estimated that we could see an annualised distribution yield of some 9.26% based on the price of $1.08 per rights unit. At 2.51c, we have a distribution yield of almost 9.3% per rights unit. This beats my estimate.

However, we have to bear in mind that the REIT usually distributes more income in the final quarter of the year. So, everything remaining equal, DPU could dip in the next quarter.

Of course, things are not going to remain the same because:

1. The REIT's investment in Optus Centre will see its first full quarter contribution in 1Q FY2015. This will help to bump up income.

2. The redevelopment of 103 Defu Lane 10 will get its TOP in May 2014. So, expect income contribution to start sometime in 2Q FY2015.

3. We have to watch out for the increase in vacant space as two Master Leases expired in April 2014. Only 73.3% of the space in these two properties have seen leases renewed.

NAV/unit: $1.47

Gearing: 31.7%

Interest Cover: 5.2x

Based on a unit price of $1.42 and assuming an annualised DPU of 10c, we are looking at a distribution yield of 7.04% per annum. Although I expect a slight upward bias in income distribution in the next 6 months, I do not find the prospective distribution yield attractive enough to add to my long position at the current unit price. Why?

Two reasons:

1. An increasingly challenging situation with the supply of more industrial space which is outpacing growth in demand.

2. The prospect of higher interest rates (risk free rates) possibly from the middle of 2015. The REIT has $111.2 million worth of loans due in October 2015 and $175.8 million due in 2H 2016.

For anyone who is investing for income and thinking of putting down some money in this REIT now, he has to wonder if he is comfortable with the prospects and how things might turn out in the next 12 to 24 months.

See presentation slides: here.

Related posts:
1. AIMS AMP Capital Industrial REIT: Rights' value.
2. AIMS AMP Capital Industrial REIT: $1.425.


mark said...

Finally. I have been waiting. LOL

I sense a 'hold' rating. Decent at 7%. Good for another half year, with all things equal. Rarely anything remains equal and at some point things will change. I place management quality rather high on the list.

AK71 said...

Hi Mark,

So far, the REIT's management has shown themselves to be competent and George Wang with his constant purchases has his interests aligned with minority unit holders. :)

PY said...

Thanks for sharing.
I have a 'Hold' rating as well :)

AK71 said...

Distribution per unit for the quarter inched up to 2.77 cents from 2.75 cents a year earlier and 2.55 cents for the quarter ended June 30 this year.

AA REIT's latest results included maiden partial contributions from its newly completed developments at 103 Defu Lane 10 and Phase 2 Extension of 20 Gul Way.

AA REIT has 26 industrial properties, all but one of which are based in Singapore. It has a business park in Sydney.


AK71 said...

AIMS AMP Capital Industrial REIT Management, the manager of AIMS AMP Capital Industrial REIT announced it will save $1.3 million per annum in interest cost under a new refinancing arrangement for its Singapore secured borrowings.

AIMS AMP Capital Industrial REIT entered into an agreement to refinance its existing secured loan facilities originally due in October 2015 and 2016 respectively. The new facility will comprise a three-year term loan facility of A$66 million; a four-year term loan facility of $125 million; and a three-year revolving credit facility of $120 million.

The manager said the new Australia dollar loan will be used for the partial funding of the Optus Centre acquisition. The Optus Centre acquisition was previously partially funded
by a $120 million dual currency revolving credit facility that was due in October 2016.

Under this new arrangement, the $120 million revolving credit facility is freed up and its maturity extended to November 2017. As a result, undrawn facilities now increase to $153.2 million.

Koh Wee Lih, CEO of the manager, said: “The new bank facility has multiple benefits; the Trust will enjoy interest savings of approximately $1.3 million per annum, extends our debt maturity profile and provides greater financial flexibility by freeing up our revolving credit line for us to execute on future opportunities.”

The refinancing arrangement also improves the trust’s debt maturity profile of the Singapore secured borrowings from 1.5 years to 3.6 years. The manager has also increased its bank syndicate from five to six banks.


AK71 said...

AIMS AMP Capital Industrial Reit Management, as manager of AIMS AMP Capital Industrial Reit, on Thursday announced a distribution per unit (DPU) of 2.83 Singapore cents for the third quarter ended Dec 31, 2014 (Q3 FY2015), an increase of 2.2 per cent from 2.77 Singapore cents a year ago.

For the third quarter, AIMS maintaine d a prudent aggregate leverage of 31.7 per cent, and increased unencumbered assets to 13 properties, with a total value at S$527.2 million, representing about 42.9 per cent of the Singapore portfolio of S$1.23 billion as at Dec 2014.


AK71 said...

AIMS AMP Capital Industrial Reit chalked up a 16.3 per cent year-on-year increase in distribution per unit (DPU) to 2.92 Singapore cents for the fourth quarter of FY15.

"The fourth quarter result was boosted by a full quarter's rental contribution from Phase Three of 20 Gul Way, and renewal of leases representing 15,646.7 sqm at a weighted average rental increase of 6.8 per cent on renewals," said chief executive of the Reit's manager, Koh Wee Lih. "Additionally, we maintained high occupancy of 95.8 per cent, and we continue to be above the industry average of 90.7 per cent."

For the full FY15, DPU came to 11.07 cents, up 5.1 per cent.


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