Thursday, July 9, 2015

Ascendas India Trust REIT

I have held on to this share for really long. It has given me steady dividends and it is the first REIT i have ever bought. It crashed to the lows after the financial crisis, but i held on. It hasn't given me great capital gains ever, because I bought it at a high. With more time on my hands, I need to review this to see what my options are.

Ascendas India Trust REIT financials:

1. PE = 12.22. Not too bad, comparable to STI P/E of 13
2. PB = 1.32 Not great, since this means that the market price is more than the asset value
3. ROE = 11.06 could be better
4. Increased in Quarterly revenue and quarterly profit
5. Dividend Yield: 5.4%. pretty good.
6. Debt / Asset: 16.3% this is surprisingly low!
7. Gearing Ratio: 25% , effective weighted cost of debt = 6.7%
7. Cash flow. There is a negative cash flow of 5M, and it comes from heavy investments and financing activities. 12M was used to fund 2 new properties in Bangalore and Hyderabad. An additional 5 M was used for refurbishing. 57 M + 35 M was also used to purchase new properties / land.
8. NAV = 0.678

Overall Economy Outlook:

India seems to be an elephant when it comes to growth. It is filled with potential, and yet it lumbers along so slowly. This Reit holds land in india, where they would then developed into commercial buildings for commercial use. The latest deal to date is the acquisition of Cybervale, in Chennai  and it has Renault Nissan as it anchor tenant.

It currently invests in Hyderabad, Chennai and Bangalore. Hyderabad and Bangalore seems to have slight potential for improvement in terms of demand but not Chennai. From the reports i found from Cushman, demand for commercial properties in these cities remains flat. However, the occupancy rates across the 6 properties are at least 93%, with 3 hitting 100%.

The weighted average lease term is 5.3 years, with about 31% expiring by 2017

Currency risk still remains on borrowings but rental yield has been hedged.

Increased in DPU from 4.56 to 4.86

Balance sheet issues:
1) negative retained earnings for the business trust since trust has paid out more than what it earned.

I think this is a good share over the long term and i will pick up more shares if price decreases, bring down the PB ratio, and only purchase when the PB is less than 1. However, i would need to ascertain 1) India's economy 2) why Trust has negative retained earnings.

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