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3 Things to Like About This Trust That Operates In The Fastest-Growing Economy In The World

Recently, I have been looking to invest in companies and/or trusts listed in Singapore’s stock market to ride on the growth of India. The country is fast becoming an economic force to be reckoned with. During the first quarter of 2018, the Indian economy grew at 7.7%, which is faster than China’s growth rate of 6.8% during the same period. India’s economy could go on to do well in the years ahead due to its rapid urbanisation, a rising middle class, and increasing consumption.

One of the trusts I came across during my research was Ascendas India Trust (SGX: CY6U), and I liked what I saw. The trust, which invests mostly in business spaces in India, was listed in August 2007. It was the first Indian property trust in Asia. Ascendas India Trust’s portfolio currently comprises seven world-class IT business parks and six modern warehouses which are all located in India.

Here are three things that I like about Ascendas India Trust.

Steady growth in total property income and net property income

In Indian rupee terms, from FY2008 (financial year ended 31 March 2008) to FY2018, Ascendas India Trust’s total property income and net property income have grown at a commendable annualised rate of 12% and 14%, respectively. These can be seen from the charts just below:Source: Ascendas India Trust investor presentation

In Singapore dollar terms, the trust’s total property income and net property income have increased by 6% and 8%, respectively, per year.

Source: Ascendas India Trust Investor Presentation

Even though the trust’s total property income and net property income have both been steadily rising over the years, its distribution per unit (DPU) has been volatile due to the depreciation of the Indian rupee against the Singapore dollar. Since the trust’s listing, the rupee has weakened by 47% in relation to our currency. However, from FY2013 onwards, Ascendas India Trust’s DPU has been on the rise. In FY2018, the trust’s DPU grew by 7% year-on-year to 6.1 Singapore cents. The chart above illustrates the changes to the trust’s DPU since its listing.

Strong tenants

Ascendas India Trust’s properties have a total of 321 tenants, as of 31 March 2018, with the largest tenant accounting for 7% of its total base rent. The top three tenants for the trust is India-listed Arshiya Limited, and the US-listed companies, Bank of America and Cognizant. Other quality tenants of the trust include listed companies such as IBM, Societe Generale, and UnitedHealth Group.

Source: Ascendas India Trust investor presentation

Companies from the US occupy 59% of Ascendas India Trust’s property portfolio, with Indian companies taking up 23% of the pie in second place. The bulk of the trust’s tenants, at 49%, are from the IT and software development sector. The next biggest sector is bank and financial services.

The trust’s committed portfolio occupancy stood at 95%, as of 31 March 2018, with the weighted average lease term at a comfortable 6.5 years.

Growth ahead

Since Ascendas India Trust’s initial public offering,  the floor area of its portfolio has grown at an annualised rate of 13%. In the years ahead, the trust can continue growing by acquiring assets from its sponsor, Ascendas-Singbridge, and from third-parties. The trust’s growth strategy is summarised in the chart below: 

Source: Ascendas India Trust investor presentation

With a clear growth strategy, Ascendas India Trust should be able to grow its portfolio consistently in the years ahead.

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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 Sudhan P doesn’t own shares in any companies mentioned.