AIMS AMP Capital Industrial REIT’s Latest Earnings: A Quarter to Be Forgotten

AIMS AMP Capital Industrial REIT (SGX: O5RU), or AA REIT, is an industrial real estate investment trust (REIT) that has a presence in Singapore and Australia. In our country, it owns 26 industrial properties, including one greenfield development at Marsiling.

This morning, the industrial REIT announced its financial results for the second quarter ended 30 September 2017. The reporting period was from 1 July 2017 to 30 September 2017.

Here’s a quick look at the financial figures from the earnings release:

1. Gross revenue slipped 1.3% year-on-year to S$29.5 million.

2. Net property income edged up 0.7% to S$19.4 million due to lower property operating expenses.

3. Distribution to unitholders slumped 6.9% to S$16.3 million.

4. Consequently, the reporting quarter’s distribution per unit tumbled 7.3% to 2.55 cents, down from 2.75 cents seen a year ago.

5. The net asset value per unit came in at S$1.36, as of 30 September 2017. At the end of June 2017, the figure was at S$1.39.

Gross revenue came down for the quarter primarily due to lower rental and recoveries from 20 Gul Way as four phases of the property reverted to multi-tenancy leases. This was partially offset by the rental contribution from 30 Tuas West Road as it became income producing from February this year.

AA REIT achieved an overall portfolio occupancy of 88.8%, comparable to Singapore’s industrial average of 88.7%.

The weighted average rental decrease for renewals was 21.1% versus the previous quarter’s 4.3%. A year ago, the weighted average rental decline for renewals was 11.1%. The latest quarter marks one of the worst rental reversions for the REIT. Investors may want to keep a close eye on how the rent renewals pan out for the next few quarters.

As of 30 September 2017, the trust had an aggregate leverage of 37.3%, with an overall blended funding cost at 3.6%. 81.4% of the portfolio’s interest rate is fixed, helping to slightly mitigate any further rise in interest rate in the near-term. The weighted average debt maturity is 1.7 years, and no debt is due for refinancing until November next year.

The redevelopment at 8 Tuas Avenue 20 achieved Temporary Occupation Permit in August 2017. A tenant was secured for the ground floor last month for a period of 10 years with rent escalations during the term.

AA REIT’s greenfield build-to-suit development at 51 Marsiling Road is targeted for completion in the third quarter of the current financial year. The development is pre-committed to a 10-year master lease term with Beyonics International Pte Ltd with rent escalations.

The industrial trust is now going at S$1.455 per unit. This gives a price-to-book ratio of 1.07 and a trailing distribution yield of 7.3%.

Keep up to date on the latest financial and stock market news by signing up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead too.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns units of AIMS AMP Capital Industrial REIT.