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ESR scoops up more AA REIT units; AEM director sells shares as stock runs up

The Edge Singapore
The Edge Singapore8/14/2020 06:30 AM GMT+08  • 3 min read
ESR scoops up more AA REIT units; AEM director sells shares as stock runs up
ESR HK Management on Aug 5 acquired 400,000 units of AIMS APAC REIT (AA REIT) for $485,440, or an average of $1.21 each. It now owns a direct stake of 9.1 million units, or 1.29% of AA REIT. ESR HK Management also owns other AA REIT units through various
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ESR HK Management on Aug 5 acquired 400,000 units of AIMS APAC REIT (AA REIT) for $485,440, or an average of $1.21 each. It now owns a direct stake of 9.1 million units, or 1.29% of AA REIT. ESR HK Management also owns other AA REIT units through various related entities such as ESR Cayman and e-Shang Infinity Cayman. As a result, ESR HK Management’s total stake in AA REIT is now 91.9 million units, or 13%, up from 12.95% previously.

On Aug 6, AA REIT announced plans to issue a tranche of perpetual securities worth $125 million with a coupon of 5.65%. This tranche is part of the $750-million multicurrency debt issuance programme established on Nov 30, 2018. Proceeds from this issuance will go towards funding a new acquisition.

Four days later on Aug 11, AA REIT announced the acquisition of a ramp-up logistics warehouse at Jurong for $129.6 million from Titan (Wenya). The warehouse at 7 Bulim Street has an existing master lease to KWE-Kintetsu World Express (S), a subsidiary of a Japanese company. The existing lease started on Jan 1, 2014, for 10 years, with a five-year renewal option. The property was acquired at an initial net property income yield of 7.07%. On a pro forma funding structure of perpetual securities and debt financing, the proposed acquisition will add 0.18 cent to AA REIT’s DPU for FY2020 ended March 2021 to 9.68 cents from 9.50 cents.

“The yield accretive acquisition will enhance the income of AA REIT’s portfolio amidst the current challenging market conditions, and the strong lease covenant and master tenant provides stability,” says Koh Wee Lih, CEO of AA REIT’s manager.

“The modern ramp-up warehouse presents an attractive long-term investment opportunity, as a strategically located property within the Jurong Innovation District, a first in this advanced manufacturing campus, with good connectivity to major expressways, and the future Tuas Mega Port and Checkpoint,” he adds.

Upon completion of the proposed acquisition, AA REIT will have a total of 28 properties, of which 26 are based in Singapore and two in Australia. On July 23, AA REIT reported a DPU of two cents for 1QFY2020 ended June 30, same as a year ago.

Riding on a semiconductor high

On Aug 4, James Toh Ban Leng, AEM Holding’s non-executive, non-independent director, sold 2.8 million shares for $11.53 million, or an average of just above $4.11 each, on the open market. With the sale, Toh is left with a total stake of just over 15.9 million shares, or 5.803%, down from 6.823% previously.

On other hand, Swiss bank UBS Group is now deemed a substantial shareholder of AEM after entities affiliated to UBS and its subsidiaries on Aug 6 bought 567,900 shares at just below $2.4 million, or $4.21 each. UBS now owns some 14 million shares in total, equivalent to a stake of 5.12%, up from 4.91% before the purchase.

AEM, which provides testing and other services for US chip giant Intel, has yet again raised its sales guidance for FY2020 ended December. It now expects to hit between $460 million–$480 million in revenue. When it announced its 1QFY2020 results ended March, it had guided FY2020 revenue to be between $360 million–$380 million. Year to date, its share price has doubled.

On Aug 3, AEM reported earnings of $55.3 million for 1HFY2020 ended June, up 147.9% y-o-y. Revenue increased by 81.7% y-o-y to $273.7 million.

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