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Latest Earnings From AIMS AMP Capital Industrial REIT: Adopting A Different Growth Strategy

AIMS AMP Capital Industrial REIT (SGX: O5RU) is a Singapore-listed real estate investment trust with a focus on industrial real estate in Singapore. Of its current portfolio of 26 industrial properties, 25 are located in Singapore.

The REIT had just released its fiscal third-quarter earnings (for the three months ended 31 December 2015) this morning. Let’s dig into it to get a better understanding of how the REIT has performed.

Revenue and distributions

For the reporting quarter, the REIT’s revenue came in at S$32.5 million. This was a 9.5% increase from the same period a year ago.

The increase in revenue can be attributed to a few reasons: (1) There was a S$1.3 million property tax recovery in the quarter; (2) rental income from Phase Three of the REIT’s 20 Gul Way property which started to produce income from November 2014 onward; and (3) higher recoveries on two properties.

There were some offsetting developments in terms of revenue growth such as slower take up at 1 Kallang Way 2A – as a result of the conversion of the master-lease into multi-tenanted leases – and redevelopment at two properties.

The increase in revenue had helped AIMS AMP Capital Industrial REIT to achieve net property income (NPI) growth of 2.7% to S$21.1 million for the reporting quarter.

Quarterly distribution to unitholders also ticked up by 2.2% year-on-year to S$18.1 million while the distribution per unit (DPU) had increased by 0.7% for the quarter to 2.85 cents.

Balance sheet and business highlights

Coming to the balance sheet, net gearing for the REIT stood at 31.5% as of 31 December 2015, down slightly from the 31.7% seen a year ago. For the reporting quarter, AIMS AMP Capital Industrial REIT had 94.4% of its borrowings on fixed interest rates; that’s a significant improvement from a year ago when the figure was only 73%.

Meanwhile, the REIT’s overall funding cost had stepped down from 4.63% a year ago to 4.2%.

AIMS AMP Capital Industrial REIT had reported a portfolio occupancy of 93.4%. While that’s above the industrial average of 90.8%, it does represent a decline from the 95.9% occupancy level seen a year ago.

Future outlook

In the earnings release, AIMS AMP Capital Industrial REIT warned that “[g]iven the economic headwinds and the strong industrial supply pipeline in Singapore, rents continued to be under pressure.” It added that the “industrial property market is expected to continue to remain challenging and [it] remains cautious on the outlook of the industrial market and will continue to proactively manage the Trust’s lease expiries.”

While the REIT’s market outlook seems a little dour, the chief executive of the REIT’s manager, Koh Wee Lih, commented in the earnings release that the REIT intends to strengthen its portfolio through asset enhancement initiatives (AEIs) as it has more than 800,000 square feet of space that is under-utilised. The REIT is currently redeveloping some of its assets, as mentioned earlier.

From the REIT’s recent results, it seems like it is sailing along quite well. It had managed to increase its DPU and has kept its gearing at a reasonable level.

With AIMS AMP Capital Industrial REIT’s management being clear on the direction they would like to take, it gives investors a better picture of how they want to steer the REIT going forward. This may serve as a good starting point to evaluate the REIT further for investors who are interested.

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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 Esjay does not own shares in any companies mentioned.