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AIMS AMP Capital Industrial REIT Shows Why Not All Types Of Growth Benefits Investors

AIMS AMP Capital Industrial REIT (SGX: O5RU) is one of the few real estate investment trusts listed in Singapore with a focus on industrial properties. The REIT currently has 26 properties in its portfolio, with 25 in Singapore and one in Australia.

AIMS AMP Capital Industrial REIT announced its first quarter earnings for the financial year ending 31 March 2015 (FY2015) just this morning. Due to rental contributions from the opening of Phase 2 of its 20 Gul Way property and higher revenue from its 56 Serangoon North Avenue 4 property, the REIT’s gross revenue for the quarter increased by 11.6% to S$27.4 million compared to a year ago.

Much lower property operating expenses also helped the REIT achieve a 24% year-on-year increase in net property income to S$19.5 million. The first quarter of FY2015 is also the first time AIMS Amp Capital Industrial REIT could record a full quarter worth of earnings from its 49% stake in Optus Centre in Australia, which was acquired in February this year.

All the reasons above helped boost the REIT’s net income to S$15.8 million for the quarter, which is a stunning 47.4% higher compared to a year ago. After the relevant adjustments were made, the REIT’s distribution to unitholders had jumped by an impressive 27% to S$15.8 million.

Unfortunately, this ostensibly strong growth in distributions only benefitted unitholders a little. Due to a private placement and rights issue last year resulting in a big increase in the number of units outstanding, the REIT’s distribution per unit only managed to grow by 2% year-on-year to 2.55 Singapore cents.

Investors in the REIT might also want to note that the REIT has been increasing its aggregate leverage recently. As of 30 June 2014, the ratio is at 32%, up slightly from 31.7% in the previous sequential quarter, and a big increase from 25.4% a year ago.

Despite an increase in leverage, there is no sign of the REIT slowing down its expansion . It is currently working on Phase 3 of its 20 Gul Way property and had also started an asset enhancement programme on its 26 Tuas Ave 7 property. Both projects are expected to help improve the yield of the properties.

Foolish Summary

Although there seems to be some growth left in AIMS AMP Capital Industrial REIT, investors should monitor the REIT’s gearing ratio closely and how its manager makes use of private placements and right issues. Sometimes, growing the top-line alone is not enough for unitholders.

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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 any shares of companies mention above.