Positive outlook priced in for now
We maintain our HOLD recommendation and S$0.90. While a-iTrust as expected delivered another strong set of results with 2Q16 DPU up 8% yo-y to 1.37 Scts and its long term outlook remains bright, we believe this has largely been priced in given the trust trades at +1SD P/BV of 1.4x.
Near-term growth drivers
Over the past year, a-iTrust has announced several developments including the construction of The V, a new 408k-sqft IT building, as well as the acquisitions of CyberVale, aVance3 and BlueRidge Phase II. Coupled with continued growth in the trust’s existing portfolio and relatively stable SGD/INR exchange rate (46-47), we project a healthy 11% DPU CAGR over the next three years.
Untapped land bank and acquisition pipeline
Through its untapped land bank and sponsor pipeline, a-iTrust has access to potential c.5.9m sqft of floor area. This provides the trust with a visible and sustainable source of growth over the long term. The ability to execute on these growth opportunities is supported by a healthy balance sheet (current low gearing of 27% rising to an estimated 35% with planned developments/acquistions in the next couple of years).
We maintain our HOLD recommendation given limited upside to our DDM-based TP of S$0.90. With yield spread over the 10-year SGD bond of 4.4%, which is close to its average spread of 5%, we believe this supports our neutral stance.
Key Risks to Our View:
A key risk to our HOLD recommendation is a stronger-than-expected INR. We have imputed a long-term SGD/INR exchange rate of 85. In addition, we have yet to include the full impact of the BlueRidge II Phase II acquisition given uncertainty over the timing and final purchase consideration. We have only included the initial subscription of the nonconvertible debentures. (Read Report)
Source : DBS Group Research