Navigating near term bends
- FY21 DPU target missed due to higher taxes and transitory vacancies across its portfolio
- Operational results expected to improve as its park physical occupancies improve, leasing discussions restart after COVID-19 disruptions
- Construction funding and acquisition estimates are pushed further into the future
- BUY maintained, TP revised to S$1.70
Investment Thesis:
Roaring back in 2022. We maintain our BUY call on Ascendas India Trust (AIT) with a lower TP of S$1.70. We have tweaked our estimates down to account for high taxes, the INR/SGD exchange rate, and higher vacancy assumptions. That said, we are attracted to AIT, as it is projected to deliver a robust DPU CAGR of 11% in FY22-23F, driven by acquisitions.
Where we differ: More conservative estimates. Despite the near-transitory portfolio vacancies, we see management placing the foundations of future growth, as the trust is positioned as a “New Economy” play with future development projects in IT parks, warehouses, and datacentres. An overall commitment of close to S$1.0bn over the next four to five years is expected to drive a 50% rise in AUM.
An emerging datacentre player. The manager has invested in the datacenter space, augmenting its position as a leading new economy player in India. The manager has identified two more sites within its IT parks in Bangalore and Hyderabad for datacentre developments and targets an IRR of 11%-12% upon completion in the medium term.
Valuation:
Our DDM-based TP is adjusted to S$1.70.
Where we differ:
Our estimates are lower than the consensus due to more conservative assumptions.
Key Risks to Our View:
The key risk to our bullish stance on AIT is a significant depreciation of the INR or delay in acquisitions and development projects.