ASCENDAS INDIA TRUST
Brokers: DBS Group Research
Target Price: $1.12
While Ascendas India Trust (a-iTrust) has rallied over 30 per cent in the last 12 months and investor interest has picked up, its growth story has yet to gain recognition among investors at large.
With Singapore-focused real estate investment trusts increasingly facing headwinds translating into slowing distribution per unit (DPU) growth, it is anticipated that investors will gravitate to a-iTrust, given its healthy two-year DPU compound annual growth rate of 6 per cent and still decent 5.4 to 5.9 per cent yield.
Over the past year, a-iTrust has announced several developments, including the construction of The V, a new IT building, as well as acquisitions of CyberVale, aVance 3 & 4 and BlueRidge Phase 2.
Coupled with the potential for healthy rental reversions of 15 to 20 per cent in Chennai and up to 5 per cent for Hyderabad and Bangalore, a-iTrust has the ability to deliver a robust 6 per cent DPU compound annual growth rate over the next two years.
The key risks are a significant depreciation of the Indian rupee, a downturn in the Indian economy which will depress rents or delays in the completion of announced acquisitions and development projects.
MAPLETREE GREATER CHINA COMMERCIAL TRUST
Target Price: $1.13
Mapletree net property income dipped 0.5 per cent and 1.5 per cent year on year to $87.8 million and $71.4 million due to the depreciation of the yuan and the implementation of value-added tax (VAT) in China. This was partly offset by higher rental income from Festival Walk.
Portfolio occupancy rose to 98.6 per cent as at the end of the third quarter, with Festival Walk remaining fully occupied and take-up at Gateway Plaza (GW) increasing to 96.9 per cent.
To date, the trust has renewed approximately 96 per cent of its retail leases for financial year 2017.
The performance at GW was hit by the implementation of VAT and higher property tax. Nonetheless, occupancy rose, with rents renewed at 10 per cent over previous levels.
Mapletree also reduced its financial year 2018 expiries of 12.1 per cent by renewing the lease of one of its largest tenants for five more years, providing longer-term earnings visibility.
The downside risks include a weaker-than-expected Beijing office market, which could affect earnings and capital values of this property segment.