What Investors Should Know About AIMS AMP Capital Industrial REIT’s Latest Earnings And Valuation
AIMS AMP Capital Industrial REIT (SGX: O5RU), or AACIR, is a REIT that focuses primarily on industrial properties. Its portfolio currently consists of 27 properties in Singapore and one property in Australia.
Although AACIR’s properties are all considered to be industrial in nature, it does have a wide variety of properties within the industrial class. For instance, it has business parks, ramp-up warehouses, cargo lift warehouses, manufacturing plants, and more.
There are two things about the REIT that investors may want to know about: Its latest financial performance and valuation.
Latest financial performance
AACIR released its latest financials in late April. It was for the fourth quarter and the whole of its financial year ended 31 March 2017 (FY2017). Here’s a chart showing some important numbers from the REIT’s income statement for FY2017 and FY2016:
Source: AACIR FY2017 earnings
As you can see, FY2017 wasn’t the best of years for the REIT given that there were declines in its gross revenue, net property income, results from joint ventures, and more importantly, distribution per unit.
The weaker performance was driven by lower rental contributions from certain properties (27 Penjuru Lane, 8 &10 Pandan Crescent, 135 Joo Seng Road and 61 Yishun Industrial Park A). Another contributing factor was the loss of rental from 8 & 10 Tuas Avenue 20 due to the properties’ redevelopment.
AACIR has been plagued by a situation of oversupply in the industrial property sector. But, the REIT manager’s chief executive officer, Koh Wee Lih, said in the earnings release that “data from the first quarter of 2017 is reflecting early signs of recovery and providing some optimism.”
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows AACIR’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 39 REITs that are in Singapore’s stock market.
Source: SGX Stock Facts; data as of 28 June 2017
Although AACIR has a more attractive distribution yield compared to the REIT-average in Singapore, AACIR’s price-to-book ratio is higher.