Ascendas India Trust - Post NDR take-aways (DBSVickers)

BUY S$0.945 STI : 3,130.34

Price Target : 12-Month S$ 1.05

Reason for Report : Post NDR update

Potential Catalyst: Acqusitions/strong operational results

DBSV vs Consensus: In line with consensus expectations for rental growth, new completions

• Strong S$ erodes underlying earnings growth

• Acquisition/development completions to underpin strong DPU growth profile over FY12-13F

• Maintain BUY, DDM-based TP of S$1.05

Strong S$ had an impact on an otherwise strong operational performance. While Ascendas India Trust (“a-itrust") performance in INR terms showed growth 11% in topline in 1QFY12, the strong S$, which appreciated against the INR by 10%, eroded its reported numbers, leading to topline and net property income coming in +1% y-o-y and –7% y-o-y to S$31.2m and S$17.6m respectively. Distribution income was also 10% lower at S$11.5m (DPU of 1.5 Scts) due to additional finance expenses incurred for the development of the new buildings (Zenith, Park Square and Voyager), while rental income has yet to be fully recognized as occupancy levels are still being ramped up with a majority of tenants currently doing fit-outs. We moderate our DPU assumptions slightly to account for lower S$-INR exchange rate (1S$ : INR 35.5 from 35 previously) and delayed revenue recognition from its newly completed properties.

Acquisitions and development projects to contribute more significantly. The forward growth picture remains robust given the expected execution of its acquisition and development projects over next few years. This is projected to boost DPU by up to c11% p.a. over FY12-13F. Earnings growth is likely to be driven by: (i) 3 recently completed buildings totaling 1.7m sqft SBA (25% of its enlarged portfolio) which should be fully leased in the coming quarters; (ii) earnings from the expected completion of the acquisition of 2 operating buildings in Hi-City (renamed to aVance Business Hub); and (iii) the planned development of a 500,000 sqft multi-tenanted office development in ITPB.

Maintain BUY, S$1.05 TP. While a strong S$ will likely be a drag on earnings in the near term, we see a-itrust ‘s FY12-13F DPU CAGR of 11% as attractive, with upside risk on execution of acquisition & development pipelines - from 3rd parties and its sponsor - in order to continuing growing its portfolio size in the longer term.