DBS started AIMS AMP Capital Industrial REIT at Buy, with a S$1.55 target price, pointing to “attractive and resilient yields.”
“Being predominantly focused on Singapore, we like AA REIT for its diversified asset portfolio and attractive exposure to in-demand properties such as business parks and modern ramp-up facilities,” DBS said in a note on Tuesday. “Supported by master leases with
built-in rental escalations, AA REIT offers investors a higher degree of income certainty ahead of the sector’s anticipated recovery in
DBS also pointed to “attractive” dividend yields of 7.4-7.6 percent a year over fiscal 2019-21.
It noted that AA REIT has around 600,000 square feet of untapped gross floor area (GFA), among the highest of its peers. With some properties’ prime locations, these sites could be redeveloped into “future-proof assets,” including data centers, it said. DBS estimated unlocking the value of the un-utilized GFA could lift pro forma 2018 revenue by 15.8 percent, which would raise its fair value to S$1.65.
AA REIT has 26 properties, located in Australia and Singapore, up from an initial portfolio of 12 Singapore industrial properties when it listed in 2007, for a five-fold increase in assets under management over the past decade to around S$1.45 billion at the end of fiscal 2018.
The unit ended Tuesday up 0.72 percent at S$1.39.