Maybank Securities is keeping its “buy” call on AIMS APAC REIT after its 1QFY2025 results which saw a decrease in distribution per unit (DPU) of 1.7% y-o-y. Analyst Li Jialin says that the REIT has two asset enhancement initiatives (AEIs) with pre-commitment, and has kept her target price unchanged at $1.39.
On the REIT’s result, Li says operations are stable. The transient dip of 50 basis points (bps) in occupancy was from Singapore portfolio, while double-digit rental reversion is sustained, he adds.
The analyst notes that the REIT’s management does not see a longer lead time by tenants to reach a leasing decision, and full-year guidance for rental reversion remains high single-digit to low teens.
Despite sector headwinds, occupancy at 1A International Business Park remains stable at above 60% and is expected to hold, benefitting from nearby Tuas mega port, Li notes.
On the two AEI initiatives, Li says that the total cost outlay for 7 Clementi Loop and 15 Tai Seng is estimated at less than $32 million, with projected net property income (NPI) yield to be above 7%.
In FY2024, the 7 Clementi Loop asset contributed $1.1 million of revenue. This asset will enter a 9-month leasing downtime as AEI work begins, but management does not expect material impact, Li notes.
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This could be offset by higher rental reversions, contribution from 15 Tai Seng commencing in 3QFY2025, non-rental income from solar panels, and potential capital top-up, the analyst adds.
The proposed food factory redevelopment remains in the pipeline until the existing lease expires next year, she continues.
AIMS APAC REIT’s total gross debt is 1.7% higher q-o-q, resulting in a gearing of 33.1%. “As the $100 million multicurrency medium-term note programme expires in 3QFY2025, we expect to see minor movements in balance sheet metrics until end-FY25,” says Li.
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“We adjusted our topline forecasts and borrowing costs in light of upcoming debt maturity in 3QFY2025, hence trimming our DPU forecasts by about 1%—2% for FY2025-FY2026. Our dividend discount model-based target price remains unchanged,” she ends.
Units in AIMS APAC REIT closed 3 cents lower or 2.308% down at $1.27.
