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Falling Distributions At Ascendas India Trust

Ascendas India Trust (SGX: CY6U), a business trust  with an emphasis on business parks in India, released its third quarter results on Thursday.

At the end of the third quarter, the trust has 5 Information Technology parks in its portfolio, with more than 90% of its rental base coming from tenants that belong to the IT industry itself.

Performance

For the current financial year, Ascendas India Trust has been quite badly hit by the depreciating Indian rupee. In fact, the Indian currency has already declined some 46% against the Singapore dollar since March 2008.

For the nine months ended 31 Dec 2013, the trust had managed to grow its “income to be distributed” by some 12% year-on-year to INR1.452b. Unfortunately, the weakening Indian currency caused the same figure to only increase by 3% year-on-year to S$30.5m. An increase in the number of units outstanding ultimately resulted in a 7% drop in distributions per unit to 3.34 Singapore cents compared to a year ago.

While drops in distributions would likely not make unit-holders happy, the trust’s manager has been trying to mitigate the impacts of a falling Indian currency by hedging its half-yearly distributions.

As of 31 Dec 2013, the trust’s properties has a portfolio occupancy rate of 96%, which is far above the corresponding figure of 85% for the properties in the vicinity of its portfolio. In addition, the trust’s lease expiry remains well spread-out and has a weighted average lease term of 4.8 years.

Date of lease maturity

Percentage of total lease area

Financial Year (FY) 13/14

5%

FY 14/15

28%

FY 15/16

13%

FY 16/17

22%

FY 17/18

14%

FY 18/19

7%

FY 19/20 & Beyond

11%

Source: Ascendas India Trust’s earnings presentation

The trust’s balance sheet has also weakened compared to a year ago as its gearing – the ratio of total debt to total assets – has increased from 17% to 23% mainly as a result of an increase in its debt load from S$164m to S$225m.

Growth

In its earnings presentation for the recent set of results, Ascendas India Trust articulated its growth strategy, which contained three pillars: 1) Its development pipeline; 2) Sponsors’ assets; and 3) External acquisitions.

For the first pillar, the trust still holds 1.9m square feet of vacant land that’s available for development.

In terms of getting access to its sponsors’ assets,  Ascendas India Trust holds the Right of First Refusal for certain assets of Ascendas Land International Pte Ltd, Ascendas India Development Trust, and the Ascendas India Growth Programme.

Lastly, the trust has some potential external acquisitions lined up in the aVance Business Hub. Ascendas India Trust has a conditional acquisition agreement on a number of buildings within the hub for a total floor area of 1.94m square feet while also holding on to the Right of First Refusal on other properties within the hub with an area of 1.16m square feet.

Yield

Ascendas India Trust closed on Friday S$0.71 per unit, providing a yield of roughly 6.3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.