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KGI starts AIMS APAC REIT at 'outperform' with TP of $1.35

Felicia Tan
Felicia Tan • 2 min read
KGI starts AIMS APAC REIT at 'outperform' with TP of $1.35
As at 12.04pm, units in AA REIT are trading flat at $1.19 with a FY2021F p/b ratio of 0.9x, according to KGI’s estimates.
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KGI Securities analysts Joel Ng and Amirah Yusoff have started AIMS APAC REIT (AA REIT) with an “outperform” recommendation and a target price of $1.35 in a report dated Dec 8.

Ng and Yusoff are positive on the REIT for its diversified and resilient portfolio, as well as its strong performance track record by its manager.

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As at Sept 30, the REIT reported a portfolio occupancy rate of 94.5%, almost 5% higher than Singapore’s industrial average occupancy level of 89.6% according to the 3Q2020 statistics released by JTC.

Its assets – with different property types, lease structures and tenants – are well-diversified on all fronts, say Ng and Yusoff.

The REIT has properties ranging from Logistics & Warehouse, Light Industrial, General Industrial, Business Parks as well as Hi-Tech.

Around 71% of its gross rental income (GRI) for the 2QFY2021 is earned from multi-tenanted assets, while the remaining GRI comes from master-leased assets with longer lease terms.

AA REIT’s properties are also tenanted by close to 200 tenants operating across a broad range of industries, including Telecommunication, Biotech/Life Sciences, Fashion and Apparels, and Furniture.

SEE: NPI recovery underway for AIMS APAC REIT: Maybank Kim Eng

The REIT’s manager has also enjoyed an “excellent track record” so far, as it has successfully made yield-accretive acquisitions, adding value to its current portfolio through property redevelopments or asset enhancement initiatives (AEIs).

This is done by building out its properties with under-utilised plot ratios, and refurbishing older assets where possible.

The REIT’s most recent design-and-build redevelopment of 3 Tuas Avenue 2 transformed the asset into a versatile ramp-up industrial facility suitable for production and storage, in line with the government’s plan to develop and upgrade the Tuas region into a high performing industrial district.

“With almost 7% of NLA still untapped, we like this as a key long term strategy that will help boost the REIT’s performance, as prospective tenants will naturally be drawn to premium quality properties,” say the analysts.

As at 12.04pm, units in AA REIT are trading flat at $1.19 with a FY2021F p/b ratio of 0.9x, according to KGI’s estimates.

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