Yesterday evening, Ascendas India Trust (SGX: CY6U) released its fiscal third-quarter earnings for the three months ended 31 December 2015.
Listed in August 2007, Ascendas India Trust is Singapore’s first listed business trust with a focus on real estate located in India.
As at 31 December 2015, the trust has six IT (Information Technology) parks in its portfolio namely, International Tech Park Bangalore (ITPB), International Tech Park Chennai (ITPC), CyberPearl, CyberVale, The V, and aVance Business Hub. It has 305 tenants that include renowned corporations like of Bank of America and General Motors.
Ascendas India Trust reports in Singapore dollar but conducts its business in India. As such, a look at the trust’s results in the Indian rupee helps give investors a better sense of how the business has progressed.
For the reporting quarter, Ascendas India Trust’s total property income grew by 15% year-on-year to INR1.75 billion. The top-line growth managed to trickle down to the bottom-line with the trust reporting a 28% increase in net property income to INR1.16 billion and a 14% jump in income available for distribution to INR648 million.
The trust has a policy to distribute at least 90% of its distributable income “to provide greater flexibility in growing the Trust.”
The good results in the quarter can be attributed mainly to contributions from the newly acquired CyberVale and aVance 3 as well as positive rental reversions at ITPC and higher occupancy at ITPB.
But with Ascendas India Trust reporting in Singapore dollar (as mentioned) and being listed in Singapore, investors should also keep an eye on currency movements between the Indian rupee and Singapore dollar.
Fortunately, the numbers in the quarter are still healthy after conversion to the Singapore dollar; that has been the result of a stronger rupee. For the reporting quarter, income available for distribution had jumped by 18% year-on-year to S$14.0 million with the distribution per unit (DPU) increasing by 17% year-on-year to 1.36 cents (14% jump to INR0.63 in local currency terms).
Ascendas India Trust ended 2015 with a net asset value per unit of S$0.64, up 6.7% from a year ago.
On the operations front, the trust seems to be retaining its tenants well, as the average occupancy across its entire portfolio came in at 97%, a slight increase from the 96% seen a year ago. As another sign, the trust’s retention rate for renewed leases had stepped up from 80% to 87% over the same period. Ascendas India Trust ended the reporting quarter with a weighted average lease term to expiry of 5.5 years.
As it is with most trusts, Ascendas REIT’s gearing ratio and interest-related numbers are important measures of its financial stability.
While the trust’s 28% gearing ratio is still at the lower end, it has increased from 23% a year ago. Moreover, the REIT’s average cost of debt had also climbed from 6.5% to 6.9%.
A total of S$177.1 million in borrowings have to be repaid over the next three years. In an environment of rising interest rates, it could get tougher for Ascendas India Trust to refinance its loans at competitive rates.
On a brighter note, the trust currently has a comfortable interest coverage of 4.2 times and 100% of its debt have fixed interest rates. The latter point means that investors won’t get any nasty surprises – at least until refinancing is needed – even if interest rates start to increase rapidly over the short-term.
Prospects & valuations
Sanjeev Dasgupta, Chief Executive Officer of the trust, appeared upbeat about the trust’s progress in the reporting quarter. He commented in the earnings release:
“The 17% growth in Ascendas India Trust’s third quarter DPU was helped by accretive acquisitions and organic growth in the portfolio. We had acquired two properties, CyberVale and aVance Building 3, last year, which added over 1.2 million sq ft of floor area to the portfolio. We continue to see improvement in our rents and occupancy levels compared to last financial year, due to a positive demand scenario.”
Ascendas India Trust last changed hands at S$0.71 on Thursday. At that price, the trust’s units are valued at 1.1 times book value and carry a trailing distribution yield of 7.6%.
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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 James Yeo doesn’t own shares in any companies mentioned.