AIMS APAC REIT: 5.0% Net Profit Growth – Financial Analysis and Investment Recommendation

Business Description

AIMS APAC REIT (AA REIT) is a real estate investment trust listed on the Mainboard of the SGX-ST since 2007. The trust’s principal investment objective is to own and invest in a diversified portfolio of high-quality income-producing industrial, logistics, and business park real estate located throughout the Asia Pacific region. The existing portfolio consists of 28 properties, with 25 located in Singapore and 3 in Australia, including a property in Gold Coast, Queensland, Optus Centre in Macquarie Park, New South Wales, and Woolworths HQ in Bella Vista, New South Wales.

Industry Position and Market Share

AA REIT operates within the industrial, logistics, and business park segments of the real estate industry. It faces competition from other REITs focused on similar property types within the Asia Pacific region. However, AA REIT’s strategic portfolio selection and robust balance sheet provide a competitive advantage, contributing to income resilience and sustainable long-term value for unitholders.

Revenue Streams and Customer Base

The company’s revenue streams are predominantly derived from rental income from its diversified portfolio of properties. As of 1H FY2025, the portfolio is supported by 194 tenants across multiple trade sectors, with 82.8% of gross rental income sourced from tenants in defensive industries. The logistics and warehouse segments have been significant growth drivers.

Financial Statements Analysis

Income Statement

For 1H FY2025, AA REIT reported a gross revenue of S\$93.5 million, a 7.7% year-on-year increase from S\$86.8 million in 1H FY2024. Net Property Income (NPI) rose by 5.1% to S\$67.6 million from S\$64.3 million. Distributions to unitholders increased by 5.0% to S\$38.0 million, with a Distribution per Unit (DPU) of 4.670 Singapore cents, up 0.4% year-on-year.

Balance Sheet

As of 30 September 2024, AA REIT’s aggregate leverage stood at 33.4%, with undrawn committed facilities and cash and bank balances totaling approximately S\$305.9 million. The weighted average debt maturity is 2.8 years, with a blended debt funding cost of 4.4% and an interest coverage ratio of 4.0 times. 74% of debt is on fixed rates, providing stability in the current environment.

Cash Flow Statement

The report does not provide a detailed Cash Flow Statement. However, it mentions that the new unsecured Sustainability Linked Loan (SLL) of up to S\$400 million and A\$150 million provides financial flexibility for asset enhancement initiatives (AEIs) and potential growth opportunities.

Dividend Information

For the period from 1 July 2024 to 30 September 2024, AA REIT declared a distribution of 2.400 Singapore cents per unit, comprising 1.910 Singapore cents of taxable income and 0.490 Singapore cents of capital distribution. The record date is 14 November 2024, and the payment date is 24 December 2024.

Key Findings

• Gross revenue increased by 7.7% year-on-year to S\$93.5 million for 1H FY2025.
• Net Property Income rose by 5.1% year-on-year to S\$67.6 million.
• Distributions to unitholders increased by 5.0% to S\$38.0 million.
• Portfolio occupancy stood at 95.0%, with committed leases occupancy at 96.7% excluding AEIs and tenant movements.
• Strong rental reversions of 16.9% for 1H FY2025.
• New unsecured SLL of up to S\$400 million and A\$150 million to support sustainability commitments and growth opportunities.

Special Initiatives

AA REIT is actively engaged in portfolio rejuvenation and growth strategies, including ongoing asset enhancement initiatives at 7 Clementi Loop and 15 Tai Seng Drive, expected to be completed by 1Q FY2026. Additionally, sustainability initiatives such as the installation of EV charging stations, rooftop solar PV systems, and smart LED lighting are progressing well, in line with the company’s ESG commitments.

Investment Recommendations

For Current Investors:

Given the positive financial performance, strategic initiatives, and sustainability efforts, it is recommended to hold the stock. The company shows potential for continued growth and stable returns.

For Potential Investors:

Considering the strong financial results, competitive positioning, and proactive management, it is recommended to buy the stock. The company’s strategic investments and sustainability initiatives present a compelling growth opportunity.

Disclaimer

This analysis is based on the financial report provided and does not constitute investment advice. Investors should conduct their own research and consider their financial situation before making any investment decisions.