Ascendas India Trust - Buy: Attractive Yield, Quality Assets at 43% discount to NAV

Buy — Amidst this current volatility, we see A-iTrust as a defensive play on Indian property. We see its attractive 12-month yield of ~13.2% as a good support and believe its quality leased asset portfolio of 4.8msf trading at ~43% discount to NAV (S$0.89cents) is available at compelling valuations. Reiterate Buy (1M), albeit at lower target of S$0.69 largely adjusting for currency risks.

4Q on track — Revenues grew 13% YoY on higher income from Crest in ITPC (0.7msf), higher rentals on renewals and operations & maintenance income. Net property income, however, grew 8% YoY, offset by increased operating expense. DPU of S$2.05 cents was up a strong 25% YoY. DPU of S$ 4.07cents for 2HFY09 to be paid by 26th May’09 offers a healthy yield of ~8%. We see this as a near-term stock trigger.

Operational metrics strong — 1) 4Q Occupancy is high at 98% with healthy retention rates of 89% on renewals. 2) Large part of 1.5msf is under constr - Chennai Phase III (0.7msf), Bangalore Mall (0.5msf), targeting to complete by 1H/2H 2010. 3) Only ~13% of leases are due for renewal in FY10, reduces risk of vacancies. 4) Increase in Sponsor’s stake to ~25% in Dec’08 (vs. 17% earlier) and cash of ~S$60m (~16% of market cap) is comforting. 5) 1HFY10 DPU due in Nov’09 already hedged at Rs34.63/1SGD though at slightly higher rates (vs. Rs33.7/SGD presently), further adds to yield visibility.

Opportunities and risks — Built-in development pipeline of SEZ (2.7msf) and acq. potential of 536,000sf plus 4.4acres in Chennai Cybervale SEZ are opportunities given low gearing of 9% and will likely boost DPU growth (not in est.). Key risks – marked slowdown in the IT industry resulting in vacancies and rental de-growth and sizeable MTM losses on its currency hedges.

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