Ascendas India Trust Analysis @ 1 July 2020

Basic Profile & Key Statistics

Ascendas India Trust (AIT) is not a REIT, it is listed as Business Trust which own majority properties in IT parks. AIT has been running similar to SREITs which distribute 90% of distributable income. Current market cap is S$ 1.47 billions which is around 15% higher than SREITs median. AIT has the same sponsor as Ascendas REIT, which is Capitaland.

Lease Profile

AIT occupancy is high at 99%. WALE is slightly shorter at 3.6 years. Do note that AIT only provide WALE weighted by NLA instead of GRI. After checking with investor relation and verifying with 2019 Annual Report, its floor area and GRI is actually quite similar. Its income is received in Indian Rupee, thus posts forex risk. Currency hedging could not provide protection for long term currencies deprecation. All of its properties are freehold. 

Debt Profile

Gearing is healthy at 28%, however, business trust has no restriction on gearing. Cost of debt is high at 5.9% which is normal in India. Fixed rate debt is high at 81% and its unsecured debt is 100%. Interest cover ratio of 4 is slightly lower than SREITs median. WADE is short as well. Highest debt maturity amount to around 32% will be expired in FY2022, posts a slight concentrated debt maturity risk.

Diversification Profile

AIT properties is geographical diversified into 5 different states. However, its top property revenue is high at 39% of GRI. Both its top tenants and top 10 tenants are lower than SREITs median.

Key Financial Metrics

Property yield is high at 8.3% which is able compensate high cost of debt. Management fees over distribution is at the high side, which translate into S$ 5.80 dividend for every dollar paid. Distribution margin is slight low at 45%, it has improved a lot as compared to 2015 at only 35%.

DPU & NAV Trend

Both DPU and NAV per unit are on uptrend, which is a desirable trend by investors.

Fundamental Valuation

Favorable	Less Favorable
Occupancy	WALE
All freehold properties	Income Received in Indian Rupee
Gearing	Cost of Debt
Unsecured debt	WADE
Top Tenant	Management Fee
Property Yield
Increasing DPU
Increasing NAV per unit

Looking at its fundamentals, I believe management has proved its capability. AIT is quite aggressive in property acquisition, which should continue to improve its fundamentals. 

Relative Valuation

i) Average Dividend Yield

As AIT did not declared DPU for last quarter, dividend yield of 6.67% is based on annualized DPU for past 1 year. Apply annualized DPU of 8.6 cents to average yield of 6.03% will get S$ 1.43.

ii) Average Price/NAV 

Average value is at 1.35, apply latest NAV of S$1.09 will get S$ 1.47

Author's Opinion

At this point of time, there is no information on the impact of COVID to its earning. We will have to wait for its coming financial statement to know. For valuation:

i) Fundamental Intrinsic Value = (Removed)

ii) Relative Valuation - Dividend Yield = S$ 1.43

iii) Relative Valuation - Price/NAV = S$ 1.47

At current price of S$ 1.29, it is considered undervalue in term of fundamental and relative valuation.

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness and reliability. It should not be taken as financial advise or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of use of material in this blog. Please always do you own due diligence before any decision is made.