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Tuesday, 18 April 2017

Ascendas India Trust

18/4/2017
Accumulate
  1. Strong fundamentals
  2. Favorable conditions in India
  3. Clear growth strategy
Metrics
  • Last done (as of 18/4/2017) S$1.115
  • AUM S$1.484bn, Floor area CAGR 11% since 2008
  • Debt: gearing 30%, well spread out debt maturity, 85% fixed, cost of debt 6.1%, INR and SGD
  • Occupancy: 97%, WALE 3.5 years, retention rate 78%, 29% leases expiring in 2017, 43% expiring 2020 and beyond
  • NAV: S$0.71, adjusted NAV S$0.90, PNAV ~1.24
  • Dividend: S$0.0616 TTM 4QFY15/16 to 3QFY16/17, Dividend yield ~5.5%
  • Net property income: CAGR 13% since 2013
Operations
  • Owns six IT parks in India - Bangalore (42%), Chennai (29%) and Hyderabad (29%)
  • Our strategy is simple – to generate attractive portfolio returns for Unitholders by investing in IT parks and office properties in key Indian cities 
  • Total number of tenants: 284, largest tenant accounts for 7% of the portfolio base rent, top 10 tenants accounted for 37% of portfolio base rent, ~50% of tenants in IT sector
Investment thesis
  • Clear growth strategy: 
    • Development pipeline: 2.24m sq ft in Bangalore, 0.37m sq ft in Chennai, 0.41m sq ft in Hyderabad
    • Sponsor assets: 3 sponsors - Ascendas Land International Pte Ltd, Ascendas India Development Trust, Ascendas India Growth Programme, all Right Of First Refusal
    • 3rd party acquisitions: 2.40m sq ft aVance Business Hub, 1.50m sq ft BlueRidge 2
    • Floor area to increase 24% based on committed pipeline
  • Favorable conditions in India
    • One of the fastest growing major economy in the world with GDP growth estimated at 6.6% in 2016
    • India moving up value chain to offer cutting edge product development and R&D hubs for global tech companies
    • Highly cost competitive environment - Occupancy costs up to 10 times cheaper than other low-cost sourcing destinations 
    • Robust IT-BPM revenue growth - Forecast to achieve 10-12% growth in FY16/17 to US$157-160 billion
Risks
  • Investment risks - failure in developing new assets
  • Currency risk - INR to SGD
  • Interest rate risk
  • Refinancing risk - however debt is well spread and debt levels not too high
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