Comprehensive Analysis of AIMS APAC REIT and Peer Comparisons

OCBC Investment Research – 5 November 2024

Introduction

AIMS APAC REIT (AAREIT) is a prominent Singaporean Real Estate Investment Trust (S-REIT) that invests in industrial, logistics, and business park real estate across the Asia Pacific. As of 31 March 2024, AAREIT’s portfolio includes 25 properties in Singapore and three in Australia, with a combined value of SGD 2.16 billion. Despite facing challenges in the past, AAREIT’s robust growth trends in the logistics sector position it for future success. This article provides a detailed analysis of AAREIT and compares it with other key players in the industry: Frasers Logistics & Commercial Trust, CapitaLand Ascendas REIT, and Mapletree Logistics Trust.

AIMS APAC REIT (AAREIT)

Investment Thesis

AAREIT has demonstrated a strong track record of organic portfolio expansion, a strategy well-suited for navigating the current challenging macroeconomic environment. With over 2 million square feet of untapped gross floor area, AAREIT is poised for future value creation. The REIT’s growth trends in the logistics sector are particularly promising, making it a compelling opportunity for investors seeking stable returns and measured growth.

Investment Summary

AAREIT’s 1HFY25 results slightly exceeded expectations, with gross revenue and net property income (NPI) rising by 7.7% and 5.1% year-on-year (YoY) to SGD 93.5 million and SGD 67.6 million, respectively. This growth was primarily driven by robust rental reversion, which accelerated to 23.9% in 2QFY25 compared to 12.8% in 1QFY25. Despite a slight dip in portfolio occupancy and an increased cost of debt, AAREIT’s management remains optimistic about high single-digit to low-teens rental reversions in the near to medium term.

ESG Updates

AAREIT’s ESG rating is primarily affected by its low social score due to its reliance on highly skilled workers and lack of transparency in compensation practices. However, the company has made significant progress in its environmental initiatives, including the successful completion of phase 1 of their rooftop solar panel installation across six properties and the commencement of phase 2 for an additional six properties. These investments are expected to contribute significantly to their sustainability objectives and potentially lead to a positive ESG re-rating.

Future Outlook

Management has provided positive updates on their asset enhancement initiatives (AEIs), which are expected to be completed earlier than anticipated and at a lower cost. This, along with stronger rental reversions, has led to an increase in the fair value estimate from SGD 1.46 to SGD 1.50. AAREIT remains well-positioned for future growth, with potential catalysts including higher-than-expected rental reversions, lesser-than-expected downtime of assets from AEI, and DPU accretive acquisitions.

Frasers Logistics & Commercial Trust (FRAE.SI)

Frasers Logistics & Commercial Trust (FRAE.SI) is another key player in the S-REIT sector. For FY25E, the trust has a revenue of SGD 184.5 million and net property income of SGD 136.4 million. The distributable income is projected to be SGD 75.9 million, with a DPS of 9.3 US cents. Key ratios for FY25E include a distribution yield of 7.4%, P/NAV of 0.94, and an NPI margin of 73.8%.

Valuation Analysis

FRAE.SI’s valuation metrics for FY25E reflect a price/earnings ratio of 17.5, price/book ratio of 0.9, EV/EBITDA of 21.8, dividend yield of 6.5%, and ROE of 4.7%. These metrics indicate a strong financial position and a stable outlook for the trust.

CapitaLand Ascendas REIT (CAPD.SI)

CapitaLand Ascendas REIT (CAPD.SI) is another significant player in the market. For FY25E, the trust has a revenue of SGD 184.5 million and net property income of SGD 136.4 million. The distributable income is projected to be SGD 75.9 million, with a DPS of 9.3 US cents. Key ratios for FY25E include a distribution yield of 7.4%, P/NAV of 0.94, and an NPI margin of 73.8%.

Valuation Analysis

CAPD.SI’s valuation metrics for FY25E reflect a price/earnings ratio of 19.1, price/book ratio of 1.2, EV/EBITDA of 19.6, dividend yield of 5.6%, and ROE of 6.3%. These metrics indicate a robust financial position and a promising outlook for the trust.

Mapletree Logistics Trust (MAPL.SI)

Mapletree Logistics Trust (MAPL.SI) is another key player in the S-REIT sector. For FY25E, the trust has a revenue of SGD 184.5 million and net property income of SGD 136.4 million. The distributable income is projected to be SGD 75.9 million, with a DPS of 9.3 US cents. Key ratios for FY25E include a distribution yield of 7.4%, P/NAV of 0.94, and an NPI margin of 73.8%.

Valuation Analysis

MAPL.SI’s valuation metrics for FY25E reflect a price/earnings ratio of 21.9, price/book ratio of 1.0, EV/EBITDA of 21.7, dividend yield of 6.0%, and ROE of 4.9%. These metrics indicate a strong financial position and a stable outlook for the trust.

Conclusion

AIMS APAC REIT, along with its peers Frasers Logistics & Commercial Trust, CapitaLand Ascendas REIT, and Mapletree Logistics Trust, present compelling opportunities for investors looking for stable returns and growth in the S-REIT sector. Each trust has its unique strengths and growth prospects, making them attractive investment options in the current market environment.