Friday, 17 March 2017

AIMS AMP Capital Industrial REIT (AA REIT) 3QFY17


Occupancy& Lease

The occupancy for Q3FY17 has go up to 94% from 92.7% in Q2FY17.
Q3
Q2
Q1
FY16
FY15
FY14
FY13
94%
92.7%
92.7%
93.4%
95.8%
97%
96.1%

The lease expiry for Q4FY17 now left with around 2.1% by the gross rental revenue after first phase of master lease at 20 Gul Way, AA REIT’s largest asset, which expired on 28 December 2016 has been 100% leased out
  1. 12.1 % in the remaining FY17 from 9% in Q2FY17
  2. 22.96% in FY18
  3. 31.77% in FY19
  4. 41.43% in FY20

As for Q3FY17 rental reversion is -13.6%, this bring 3 consecutive having negative rental reversion since FY17 reflecting the challenge in the industry rental. The negative rental reversion for FY17 could be supported by 30 Tuas West Road that will start contributing in Mar for Q4FY17, the annual rental income for this property will be $4.15 million
Q3
Q2
Q1
FY16
-13.6%
-11.1%
-1.6%
9.5%

The challenge will be FY18,
There will be three master leases expiring in FY18, those are 20 Gul Way (progressive expiry over four years from FY17 onwards), 3 Tuas Avenue 2 and 2 Ang Mo Kio Street 65. These three master leases constitute approximately half of the expiries in FY18.

Another saving grace will be 8 and 10 Tuas Avenue 20 target to be ready in 2Q 2017and can mitigate the loss of revenue due to negative rental revision, this also provided if it starts to generate income.

Dividend

DPU of 2.77 cents per unit for the quarter (increase of 0.7 per cent from last quarter) and this bring up 9MFY17 dividend to 8.27 cents.
Q3
Q2
Q1
FY16
FY15
FY14
FY13
0.0277
0.0275
0.0275
0.1135
0.1107
0.1053
0.1072
98.8%
98.8%
99.9%
100%
100%
100%
100%

Will AA REIT able to maintain 2.77 cents or more to conclude the FY17 dividend to be around 11 cents despite the Q3 rental reversion of -13.6%? especially 20 Gul Way lease expiry was on 28 Dec 16 and on the other hand gross revenue and net property income for 3Q FY2017 increased 1.5% and 2.7% respectively q-o-q.
·         The gross revenue achieved for 3Q FY2017 of S$30.4 million was S$0.5 million higher than the gross revenue for 2Q FY2017 of S$29.9 million. This was mainly due to higher rental contributions from the properties at 27 Penjuru Lane, 29 Woodlands Industrial Park E1 and 11 Changi South Street 3.

Debt

Reduced overall blended funding cost of 3.7% from 4.2% a year ago and in Q2FY17 was 3.9%


Summary

  1. 18 & 10 Tuas Avenue 20 and greenfield development at Marsiling which are targeted to complete in the second half of 2017 will provide support for the dividend for FY18 considering 29.6% lease will expire in FY18 and with current negative rental reversion
  2. Based on the guidance provided, seem the interest rate increase will have marginal impact for FY18.

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