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Ascendas India Trust’s Latest Earnings: Hurt By Currency Movements

Last Friday, Ascendas India Trust (SGX: CY6U) released its first-quarter earnings for its fiscal year ending 31 March 2017 (FY16/17) .

As a brief background, Ascendas India Trust was listed in August 2007 as the Singapore stock market’s first business trust with a focus on real estate located in India.

The trust currently has six IT (Information Technology) business parks in its portfolio, namely, International Tech Park Bangalore (ITPB), International Tech Park Chennai (ITPC), CyberPearl, CyberVale, The V, and aVance Business Hub. These parks house a total of 289 tenants.

With that, let’s take a closer look at Ascendas India Trust’s latest results.

Financial highlights

The business trust reports in the Singapore dollar but conducts its business in India. As such, a look at the trust’s results in the Indian rupee could help give investors a better sense of how the business has progressed.

For the reporting quarter, Ascendas India Trust’s total property income grew by 11% year-on-year to INR1.78 billion on the back of positive rental reversions and income from new acquisitions (the trust bought aVance 3 in July 2015 and CyberVale 3 in March 2016).

The top-line growth managed to trickle down to the bottom-line with the trust reporting a 12% increase in net property income to INR1.16 billion and a 4% jump in income available for distribution to INR690 million.

But with Ascendas India Trust being listed in Singapore and reporting in the Singapore dollar (as mentioned), investors should also keep an eye on currency movements between the Indian rupee and Singapore dollar.

Sadly, the dollar had appreciated by 5% against the rupee over the same period a year ago. This resulted in the income available for distribution to be flat at S$14 million. The trust’s distribution per unit (DPU) ended up being 1.36 Singapore cents in the reporting quarter, a slight decline from the 1.37 Singapore cents seen in the first-quarter of FY15/16.

Ascendas India Trust ended the reporting quarter with a net asset value per unit of S$0.65, up 1.56% from the S$0.64 seen in the previous year.

Operational highlights

The trust said its average occupancy rate across its entire portfolio came in at 97%, unchanged from the same quarter a year ago. Ascendas India Trust also ended the reporting quarter with a weighted average lease expiry of 3.2 years.

Investors may also want to observe the trust’s gearing ratio and other debt-related numbers.

While the trust’s gearing ratio is currently just 29%, it has increased from 26% a year ago. Moreover, the REIT’s average cost of debt and interest coverage had both weakened – the former by climbing from 6.8% to 7.2% and the latter by falling from 4.5 to 3.6. In general, investors should watch the cost of debt for a trust – if the cost of debt rises, it is likely to eat into the bottom-line and hence, the distribution.

On a positive note, 100% of the trust’s borrowings are on fixed rates. This mean that investors would likely not get any nasty surprises – at least until refinancing is needed – even if interest rates start to rise over the short-term.

Prospects & valuations

On the matter of its outlook, Ascendas India Trust cited a few numbers in its earnings release from a market research report by Jones Lang LaSalle Meghraj (JLL):

  • Bangalore’s overall vacancy rates had dropped from 4.1% in the last quarter to 3.4%. But ITPB’s micro-market is in Whitefield and in that area, vacancy rates actually increased from 5.1% to 5.5%. “JLL expects rental values to remain stable in 2016.”
  • For Chennai, vacancy rates had dipped from 12.7% to 12.0%. ITPC’s micro-market experienced an even steeper decline in vacancy rates from 5.2% to 7.2%. “JLL expects the rental values in [ITPC’s micro-market] to improve in 2016.” Meanwhile, JLL also “expects rental values in [CyberVale’s micro-market] to improve in 2016.”
  • Hyderabad bucked the trend. Its vacancy rate had increased from 8.2% in the last quarter to 8.7%. The V, CyberPearl and aVance belong to the same micro-market, Hitec City. That market actually saw the vacancy rate decrease from 3.3% to 2.0%. “JLL expects rental values in Hitec City to improve in 2016.”

Ascendas India Trust closed at S$1.00 today. At that price, the trust’s units are valued at 1.54 times book value.

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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.