SINGAPORE (Oct 25): DBS Group Research is maintaining Ascendas India Trust (a-iTrust) at “buy” with $1.25 target based on three reasons: New growth engine, acquisitions and untapped landbank.
In a Thursday report, lead analyst Mervin Song says the acquisition of modern warehouses last year and the recently announced redevelopments and acquisitions are expected to translate into a 61% rise in floor area which could support three-year DPU CAGR of 13%.
“This is three to four times faster than the average for the S-REIT sector,” says Song.
In addition, a-iTrust’s landbank is a visible source of growth over the long term. Apart from access to over 5 million sf of floor area in its untapped landbank and sponsor pipeline, its expansion into the Indian warehouse space offers a potential acquisition pipeline of 2.8 million sf.
Song says the expansion into the modern Indian warehouse sector warrants a premium not only from the boost to a-iTrust’s near-term DPU outlook but “the ability to accelerate medium-term earnings growth”. That is why DBS’s target price of $1.25 is higher than that of consensus.
“Our confidence in a-iTrust’s ability to execute on its warehouse expansion is due to its sponsor Ascendas-Singbridge’s strong track record in the Asian warehouse space,” says Song, adding that a strong balance sheet also helps it the execution of its growth plans.
Key risks include a significant depreciation of the Indian rupee and a downturn in its economy.
Year to date, units of a-iTrust are down 4.4% to $1.09 with a FY20F yield of 6.9%.