SINGAPORE (May 24): DBS Group Research likes AIMS AMP Capital Industrial REIT (AAREIT) for its stable DPU outlook, earnings visibility and organic growth potential.

In an unrated Tuesday report, analyst Derek Tan says, “We expect AAREIT to weather through the current industrial downcycle, and to deliver stable returns over FY17F-18F.”

AAREIT invests in a diversified portfolio of 25 industrial estates located in Singapore and a JV in Australia as at end March.

These include warehousing and logistics, business parks, light industries, high tech and manufacturing activities, supporting tenants in a myriad of different industries.

While Tan expects certain master leases will not be rolled over in the coming years as he has projected the contribution from master-leases to decline from 50% to 35% by the end of FY18, he expects underlying occupancies to be fairly high, implying that the downside to earnings is likely to be marginal.

Tan also sees untapped value from its portfolio, coming from about 760,000 sqft or 31% of additional GFA to be deployed in the existing portfolio by redeveloping the under-utilised properties, providing inorganic growth opportunities.

“Planned optimisation of these spaces could mean upside to distributions, NAVs when executed upon,” says Tan, who has a $1.52 target price for AAREIT.

As at 3.10pm, units of AAREIT are trading flat at $1.38.