Broker Name: Maybank Research Pte Ltd
Date of Report: August 4, 2025

AIMS APAC REIT Delivers Stable 1QFY26: Dividend Resilience and Portfolio Progress Amid Market Shifts

Overview: AIMS APAC REIT’s 1QFY26 Results Signal Stability and Strategic Execution

AIMS APAC REIT (AAREIT SP) posted a stable set of results for 1QFY26, underscoring its resilience and proactive management in a challenging REIT landscape. The trust reported a 1QFY26 distribution per unit (DPU) of SGD2.28 cents, representing a marginal year-on-year increase of 0.4% but a quarter-on-quarter decline of 9.9%. Key operating and financial metrics remained robust, with portfolio reconstitution and asset enhancement initiatives (AEIs) progressing as scheduled. Maybank Research Pte Ltd maintains a HOLD rating, raising the target price to SGD1.25 (from SGD1.20) on the back of upgraded DPU forecasts.

1QFY26 Performance Review: Revenue, Income, and Portfolio Metrics

• Gross Revenue: SGD47.4 million, up 0.2% year-on-year.
• Net Property Income (NPI): SGD34.1 million, down 1.0% year-on-year, primarily due to vacancy from ongoing AEIs at 7 Clementi Loop.
• DPU: 2.28 cents, reflecting a 0.4% year-on-year increase but a 9.9% quarter-on-quarter decrease due to capital distribution timing.
• Portfolio Occupancy: 93.7% (previous quarter: 93.6%). Excluding AEI impact, committed occupancy stands at a robust 96.5%.
• Rental Reversion: Positive 5.4% for leases representing 8.8% of net lettable area (NLA), mainly driven by logistics and warehouse assets. This is a moderation from previous quarters’ high-teens reversion, signaling the completion of the mark-to-market upcycle.

Proactive Capital Management and Debt Profile

• Aggregate Leverage: 28.9%, reflecting prudent capital structure.
• Cost of Debt: Stable at 4.3%.
• Perpetual Securities: SGD125 million issued at a 4.7% coupon, used to redeem an existing perpetual with a 5.65% coupon. The remaining perpetual carries a 5.375% coupon.
• Debt Hedging: 84% of debt is hedged to fixed rates, up from 70% in 3QFY25.
• Interest Coverage Ratio (ICR): 2.4x.
• Blended financing costs are expected to fall further amid declining SGD and AUD base rates, improving distributable income for unitholders.

Strategic Asset Management: AEIs and Portfolio Reconstitution

• Asset Enhancement Initiatives (AEIs): On track, with temporary vacancies impacting short-term NPI but expected to deliver long-term value.
• Divestment: Sale of 3 Toh Tuck Link at a 32.5% premium to book value, proceeds allocated to debt repayment.
• Portfolio Mix: Singapore assets (logistics, warehouse, business park, hi-tech, industrial) and Australian assets continue to underpin stable occupancy and rental income streams.

Estimate Changes and Upward Revision in Target Price

Maybank Research has revised its FY26 and FY27 estimates as follows:

Valuation: Dividend Discount Model and Investment Thesis

AAREIT is valued using a three-stage Dividend Discount Model (DDM) with a cost of equity of 7.2%, revised from 7.5%. The revised target price of SGD1.25 reflects:

• Upgraded DPU forecasts for FY26 and FY27 (up c.2.6%).
• Resilient economic growth, leading to higher revenue and NPI assumptions.
• Increased distribution from the Australia portfolio.
• Lower cost of equity assumptions.

The HOLD recommendation is maintained due to high all-in gearing (including perps) and overhang from substantial unit transactions.

Financial Overview: Key Metrics and Future Projections

Key Portfolio Highlights and Operational Drivers

• Diversified Asset Base: Warehouses (36% of AUM), industrial/manufacturing (19%), hi-tech (7%), business park (4%), and Australia (34%).
• Geographic Occupancy: Singapore assets occupancy at 92.8% and Australia at 100%.
• Asset Type Occupancy: Logistics & warehouse 92.5%, business park 93.9%, hi-tech 99.8%, industrial 95.6%.
• Rental Reversion Dynamics: Logistics & warehouse saw a 7.3% positive reversion, industrial 2.4%. Business parks faced -2.0% negative reversion, highlighting sector-specific challenges.

Risk Factors and Outlook

Key risks for AAREIT include:

• Refinancing risks if credit markets tighten.
• Potential for higher vacancy, especially in logistics and industrial assets.
• Exposure to dilutive corporate actions.

Nonetheless, DPUs are supported by rental step-ups in master leases and stable NPI margins, while accretive redevelopments and strategic acquisitions remain long-term growth levers.

ESG, Governance, and Management Practices

• Environmental: Nearly half of Singapore portfolio by NLA is BCA Green Mark compliant; Australian assets hold NABERS Energy and Water rating.
• Governance: Strong board independence; management fees aligned with peer benchmarks; payout ratio consistently above 90% for tax transparency.
• Social: Emphasis on employee training and gender diversity (15 females among 22 employees, 2 out of 5 in management team).
• Risk Score: Rated 17.3 (Low) by Sustainalytics, with no recent ESG controversies.

Shareholder and Market Profile

• Major Shareholders: ESR Group Ltd (11.4%), WANG GEORGE /AIMS/ (11.0%), The Vanguard Group, Inc. (3.3%).
• Market Capitalisation: SGD1.1 billion (USD852 million).
• Free Float: 74.2%.
• 52-Week High/Low: SGD1.40 / SGD1.17.

Price Performance and Peer Comparison

• 1-Year Absolute Return: 3%.
• Relative Return to Index: -15% (12 months).
• Consensus DPU: 9.9 cents for FY26E and FY27E versus Maybank’s forecasts of 9.4–9.7 cents, indicating a slightly more cautious outlook.

Conclusion: HOLD Rating Reaffirmed with Upbeat Revisions

AIMS APAC REIT continues to demonstrate operational resilience, active portfolio management, and disciplined capital allocation. While near-term upside is capped by gearing and transaction overhang, the trust’s strategic initiatives and stable income profile underpin its long-term attractiveness. The revised DDM-based target price of SGD1.25 and a HOLD recommendation reflect a balanced risk-reward profile for income-focused investors seeking exposure to Singapore and Australian industrial assets.