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Ascendas India Trust’s Latest Earnings: Another Great Quarter Despite Currency Impact

Ascendas India Trust (SGX: CY6U), which owns seven IT parks and six warehouses in India, has been riding on the coattails of India’s economic growth. It continued its winning streak of earnings growth in the September to December third quarter. Higher interest income, better performance in existing properties and a one-off tax benefit helped to boost distribution per unit by 25%.

Here are some of the key highlights from the trust’s earnings update for the latest quarter.

The numbers for the quarter

In Indian rupee terms

  • Total property income increased 6.0% to ₹2,361 million
  • Net property income rose 14.0% to ₹1,779 million
  • Distributable income increased 53% to ₹1,239 million

In Singapore dollars

  • Total property income decreased 3.0% to S$44.9 million
  • Net property income rose 4.0% to S$33.9 million
  • Distributable income increased 39.0% to S$23.6 million
  • Distribution per unit (DPU) increased 25.0% to 2.05 Singapore cents
  • Average exchange rate: 52.5 Indian rupee to 1 Singapore dollar (9.8% appreciation of SGD)

Behind the numbers

On a constant currency basis, all financial metrics improved. The higher net property income was due to incremental rental increase in its existing portfolio. However, in Singapore dollar terms, total property income decreased by 3.0% due to the 9.8% depreciation of the Indian rupee from a year ago.

Nevertheless, net property income and distributable income still increased from a year ago. The faster rise in distributable income compared to net property income was due to a one-off tax benefit of ₹170 million. Excluding this, distributable income in constant currency terms would have increased by 31% instead.

The chart below shows the trust’s DPU over the last 12 years:

Source: Ascendas India Trust FY18/19 Q3 Earnings Presentation

Financial position

  • Gearing stood at at 33%, as of 31 December 2018
  • 80% of its debt is on a fixed rate
  • Debt headroom before hitting the 45% regulatory limit stands at S$451 million
  • Interest cover remained unchanged at 4.1 times

Ascendas India Trust still has ample room to take on more debt for acquisitions and developments in the future. Its interest cover, while comparatively low at 4.1 times, remained unchanged from the previous quarter, which is a good sign.

Portfolio updates

  • Committed portfolio occupancy for the quarter was 98%
  • Weighted average lease expiry is 4.3 years
  • Only 5% of leases are due in the remaining quarter of the year, and 9% due next year
  • The top 10 tenants accounted for 34% of portfolio base rent

Ascendas India Trust portfolio remains healthy with tenant uptake high. The office market in India is on the rise, underpinned by strong economic growth in India.

Property developments

There are a couple of developments either in the works or about to commence.

Two new buildings in International Tech Park Bangalore, one of the trust’s IT parks, are in the works. One building, MTB4, is expected to be completed in the second half of 2019, while the second building will start construction this year and is expected to be completed by the second half of 2020.

Additionally, in May 2018, the trust signed a master agreement to acquire five future buildings in aVance Business Hub 2 at Hyderabad. In July that same year, it entered into a forward purchase agreement for the first two buildings, which will also expand the trust’s leasable area. The details of this transaction can be found here.

The road ahead

The trust looks set to expand its portfolio based on the committed pipelines of development and acquisitions.

Source: Ascendas India Trust FY18/19 Q3 Earnings Presentation

Besides growth in its asset base, its existing properties also seem to be doing well, with a high occupancy level and well-spread out lease expiries.

The Foolish bottom line

It was another good quarter for the trust. Despite the weakening of the Indian rupee, the trust still managed to grow its distributable income in Singapore dollar terms, even after excluding the one-off tax item. However, the weak Indian Rupee remains a concern for investors. Further weakening of the currency going forward will continue to negatively impact growth and DPU.

At its last traded price of S$1.09, Ascendas India Trust had a price-to-book ratio of 1.23 and a distribution yield of 6.3%.

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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 Jeremy Chia doesn't own shares in any companies mentioned.