Is AIMS APAC REIT A Good Buy? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of AIMS APAC REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To October 2024

Business Description

AIMS APAC REIT is an industrial REIT that was listed in 2007 and owns 28 office properties (25 are in Singapore and 3 are in Australia).

What I Like About AA REIT:

Resilient occupancy rate & decent WALE (Fig 12)
Tenants are well diversified and are in defensive and resilient industries
Management seems clear about its expansion strategy: focusing on expanding its foothold in Australia and enhancing and redeveloping properties within the portfolio.

What I Do Not Like About AA REIT:

Despite having a clear strategy for portfolio expansion, the management has a poor historical record of delivering yield accretive acquisitions as the dilution impact often outweighs the top and bottom-line growth.
The heavy use of perpetual securities makes it difficult to assess the impact of interest rates on the health of the balance sheets (Fig 4)

Updates From Recent Performance (FY 2024)

General Comments:

Gross revenue and Net Property Income improved by 5.9% and 6.9% on the back of strong rental reversion which stood at 24.3% for FY2024.
The DPU, however, fell by 5.9% due to a larger unitholder base following the S$100m equity fundraising.
Divestment of 541 Yishun Industrial Park A at an 8.4% premium.
The decrease in total assets of S$28.8mil and Net Asset Value (-4.4%) is due to revaluation losses on the portfolio and the impact of the weakening of AUD against SGD.

Positive Headwinds:

Singapore’s industrial market continues to remain healthy with manufacturing sentiment improving and a tightening of supply that is fueling a “flight to quality”.
Outlook for the warehouse segment remains positive with eCommerce and 3rd Party logistics companies remaining keen to secure high-quality spaces.
Existing AEI initiatives have already secured master and anchor leases which provide stability in future cash flow once it is completed. (Post AEI NPI yields are estimated to be over 7% upon completion).

Negative Headwinds:

Further weakening of AUD against a strong SGD might result in a persistent performance drag of overseas properties because of Foreign Exchange losses.

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