AIMS APAC REIT Review @ 25 January 2023

Basic Profile & Key Statistics

• Main Sector(s): Logistics, Industrial & Office
• Country(s) with Assets: Singapore & Australia
• No. of Properties (exclude development/associate/fund): 29

Key Indicators

Performance Highlight

Gross revenue, NPI, distribution to unitholders and DPU increased yoy mainly due to higher income from existing properties and contribution from Woolworths Headquarters which was completed on 15 November 2021.

Rental Reversion

Rent reversion for the latest quarter is at +21.2%. The main contributors come from logistics and warehouse and general industrial.

Sensitivity to Interest Rate

For every 0.25% interest rate increase, DPU impact would be 0.08 cent per annum, approximately 0.83%.

Distribution Breakdown

• Distributable Income Breakdown:
• 83.8% from Operation
• 16.2 from Fees Paid/Payable in Units (Assume 100% management fees payable in units for the latest quarter, explanation in Author's Opinion section below)
• Distribution = 99.9% of Distributable Income
• Distribution to Perpetual Securities Holder = 29.6% of Distributable Income

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 10%
• Highest lease expiry within 5 years: Below median for more than 10%; Falls in FY24
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: ± 10% from median
• Gearing ratio including perps: Above median for more than 20%
• Cost of debt: Above median for more than 10%
• Fixed rate debt %: Above median for more than 10%
• Unsecured debt %: Below median for more than 20%
• WADM: Above median for more than 10%
• Highest debt maturity within 5 years: Above median for more than 20%; Falls in FY27
• Interest coverage ratio: Below median for more than 20%

Diversification Profile

• Top geographical contribution: Above median for more than 20%
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: Below median for more than 10%
• Top tenant contribution: Above median for more than 20%
• Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

• Property yield: Above median for more than 10%
• Management fees over distribution: Above median for more than 20%; $4.33 distribution for every dollar paid 
• Distribution on capital: Below median for more than 10%
• Distribution margin: Below median for more than 10%

Trends

• Uptrend: Occupancy
• Flat: NAV per Unit 
• Slight Downtrend: DPU
• Downtrend: Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

Relative Valuation

• P/NAV: Average for 1y, 3y & 5y
• Dividend Yield: Average for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
High REIT Manager's Shareholding	Short Weighted Average Land Lease Expiry
High Directors of REIT Manager's Shareholding	High Perpetual Securities %
High Occupancy	High Cost of Debt
Long WALE	Low Unsecured Debt %
Well Spread Lease Expiry	Concentrated Debt Maturity
High Fixed Rate Debt %	Low Interest Coverage Ratio
Long WADM	High Top Geographical Contribution
Low Top Property & Top 5 Properties Contributions	High Top Tenant & Top 10 Tenants Contributions
High Property Yield	Non Competitive Management Fees
Occupancy Uptrend	Low Distribution on Capital
	Low Distribution Margin
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

DPU has increased by 7% as compared to 2.42 cents in the previous quarter despite a similar gross revenue and NPI. While the DPU increase is good news, I am curious to know where the increase comes from. As shared in my previous post - REIT Distribution Demystified and Manipulatable Components, there are manipulatable components that a REIT could manage their DPU. From the business updates, there is no income support or proceeds from divestment mentioned. And with similar gross revenue/NPI, the distributable income from directly managed assets would be more or less the same. As for distribution from JV, the figure is consistent for the past 1 year financial statement. As such, I think the key lies in management fees payable in units. Let's see below for the extracts from 1H FY23 financial statement.

Now, I would take 50% of the above figures as a quarter average and compare them with 3Q FY23.

From the above table, the distribution increase is not quite aligned with the gross revenue/NPI increase, with the distribution increase to around S$ 1.8 mil. Take a look at the management fees paid in cash for the quarter average, which amounts to S$ 1.9 mil, notice the similarity? So, probably the DPU increase this time is due to higher (or 100%?) management fees payable in units? Or there could be a sudden jump in distributions from the joint venture? Though I think it is less likely due to the strong SGD exchange against AUD. 

With limited info due to half-yearly financial reporting, I could only guess. As long as the increase in distribution amount could outpace the increase in issued units from fees elected in units, DPU would not be affected.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and detail of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.