AIMS APAC REIT (“AA REIT”) is a real estate investment trust listed on the Mainboard of the Singapore Exchange Securities Trading Limited. Their investment mandate is to invest in high quality income-producing industrial real estate throughout Asia Pacific.
Nature of revenue stream
Below is a list of their properties as at 31 March 2019. As at the time of this writing, there is no change to their assets in Singapore in FY2020.
Their tenant based are leaning more towards the Logistic (28.2%), Telecommunication (13.9%), and Engineering (11.5%). The rest of the industries individually are below 10% of their 4Q FY2020 Gross Rental Income. Refer to the the breakdown below.
Their leases are also multi-tenanted. In their earlier announcements, management have highlighted that they are moving towards converting their properties towards multi-tenancy to reduce reliance on a few concentrated master leases.
Their revenue is only not concentrated on any single key tenant. The top tenant contributes 13% of revenue and the top 10 tenants contributes to 47% of the total revenue.
Their Revenue and Net Property Income (“NPI”) have been improving since FY2011.
MSCI Singapore Small Cap Index
As of 29 May 2020, AA REIT will be included in the MSCI Singapore Small Cap Index as of the close of market trading. The inclusion signifies higher trading liquidity and visibility among global institutional investors, helping to diversify the investor base and maximise value creation for our Unitholders over the long term.
From a current investor point, this helps to bring up share price allowing for capital appreciation.
Awards
The Asset ESG Awards are the longest running ESG awards in Asia bestowed annually by leading research house, Asset Benchmark Research (“ABR”).
AA REIT have been consistently been awarded “The Asset ESG Corporate Awards” over the last few years. In 2019, they have been awarded the Gold Award. This is a testimony to the managers credentials and I believe this asset is well-managed.
Website: The Asset ESG Corporate Awards 2019
Financial matters
Their Net Asset Value per share is also $1.351. This means that they are currently trading at a discount of 10%. Given the economic uncertainty, I am still expecting some asset fair value write-downs. 10% in my opinion is a more than sufficient headroom.
In the calendar year 2019, they paid a total dividend of $0.103. Based on the current share price of $1.22, this translates to a yield of 8.44%.
Key things to note
Essential services
The manager said there has been minimal impact to AA REIT’s operations during Singapore’s “circuit-breaker” period. It has been able to continue carrying out critical functions of the portfolio’s asset and facility management with reduced onsite staff supporting tenants and more than 50 percent of the Reit’s Singapore tenants remain open during the “circuit-breaker” period as they are deemed essential services.
Compared to a retail REIT which have majority of their clients having to temporarily close or operate at a smaller scale during circuit breaker, the impact to AA REIT will be smaller.
The manager’s duty is to reassure investors that there are no issues with the Trust. However, it also brings to attention that there is around 50 percent of their tenants that are actually affected as they are deemed as non-essential.
Currently in the last 2 months, there have been no mention for landlords to offer rebates to industrial tenants. We should however assume that they will need to do so in the near future. This will adversely impact their DPU which in turn lead to lower payouts.
Website: AIMS Apac Reit cuts Q4 DPU by 27.3% to S$0.02
Conclusion
AA REIT have been on my list for the last few years. Granted they are more of a stable dividend stock but with limited upside in terms of share price appreciation over the last few years. This however can give the investor a peace of mind.
