Ascendas India Trust (SGX: CY6U) is the only trust listed in Singapore that invests solely in India. Despite the weakening Indian rupee against the Singapore dollar, Ascendas India Trust has managed to deliver growth in distribution per unit over the last six years.
Although currency fluctuations remain a key risk for investors of Ascendas India Trust, some positives may make Ascendas India Trust a worthwhile investment.
A stable portfolio
Ascendas India Trust has a well-diversified portfolio across five cities in India. In total, it has 337 tenants at its seven IT parks and six warehouses. Notably, its largest tenant only contributes 7% of the portfolio base rent, and hence the trust has little concentration risk.
As of 31 March 2019, its portfolio also has a well-spread out lease expiry profile. The chart below illustrates when leases are due for renewal:
Source: Ascendas India Trust FY2018/19 Q4 Earnings Presentation
Low gearing and capacity to fund expansion through debt
Another key factor is its comparatively low debt. A trust with a low gearing has a greater capacity to take on more debt to fund acquisitions or to make strategic asset enhancement initiatives.
In Ascendas India Trust’s case, it has a gearing of 31%, well below the regulatory cap of 45%. The low gearing affords its around S$593 million in debt headroom, which it can use to make acquisitions.
Visible growth pipeline
Finally, Ascendas India Trust has a visible growth pipeline. It is already constructing two new buildings at International Tech Park Bangalore, one of its IT parks.
Also, the trust is redeveloping another of its IT Parks, The V. The redevelopment will increase the leasable area of the IT park by 3.5 million square feet.
On top of the development of existing assets it owns, the trust has proposed acquisitions of two buildings in aVance Business Hub to add to the four buildings it already owns at the IT Park. It has also entered into a structured agreement to acquire five future buildings in the area.
Lastly, Ascendas India Trust will acquire two buildings at AURM IT SEZ and has a right of first refusal of the remaining 2 IT SEZ buildings.
In total, the developments and proposed acquisitions will bring the total floor area in the trust’s portfolio up to 20.1 million square feet, an increase of 61% from its existing portfolio.
Depending on how the trust funds the acquisition when the time comes, the enlarged portfolio could be accretive to distribution per unit (DPU).
The Foolish bottom line
There are many things to like about Ascendas India Trust. The trust has taken steps to plant seeds of growth for the future and looks likely to continue to grow its net property income over the next few years. Having said that, Ascendas India Trust investors continue to be hampered by the weakening Indian rupee. Investors should consider if its growth prospects outweigh the currency risk that plagues the trust.
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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.