Source: Standard Chartered Equity Research / 20 April 2012

FY12 DPU in-line with forecast

• AAREIT released full year results this morning, with FY12 DPU of 10.45Scts, in line with our estimates (+2%) and consensus
• Portfolio performance was robust, occupancy is high at 99.2% and management has been able to achieve positive rental reversions of c10-15%
• Positive revaluation of +3.8% y/y, which resulted in NAV/unit rising 3% q/q to S$1.406/unit
• Implementation of Distribution Reinvestment Programme to provide investors with the option to reinvest distribution at a slight discount to market
• Reiterate Outperform, PT: S$1.42/unit

Solid full-year performance

AAREIT announced FY12 results with DPU of 10.45Scts, in line with our forecasts (+2%) and consensus. AAREIT is the best SREIT performer YTD (+25%) and has outperformed the FSTE Singapore REIT Index by c15%. In our view, there remains scope for AAREIT to explore redevelopment opportunities at some of its properties which have underutilised plot ratios. The REIT is trading at a 15% discount to book, with what we view as an attractive c8.9% FY12 DPU yield. The ex-date is 2 May 12 and distributions will be paid on 19 Jun 12. We reiterate our Outperform rating on the stock with PT: SGD1.42/unit (20% upside to last close).

Financial Overview

Leasing performance was strong, with management achieving positive rental reversions of 10-15% at c20% of lettable space. Portfolio occupancy is high at 99.2%. Its portfolio also saw positive revaluation (+3.8% y/y), which results in NAV rising to SGD1.406unit (vs. SGD1.367 in the last quarter).

Valuation
We adjust our valuation slightly to account for the actual full-year performance and lower-thanforecast interest expense. There is no change to our valuation; we maintain our price target of S$1.42/unit, at which, AAREIT would be trading at 1x P/B.

Fig1: EPU & DPU Forecasts

New Chairman for AAREIT

On 19 Apr 2012, the trust announced that Mr Andrew Bird has been appointed as the Non-Executive and Non-Independent Chairman of the Manager, and will assume the responsibilities of the outgoing Chairman George Wang (of AIMS Financial Group). Mr Bird is currently a director and Chief Investment Officer of AMP Capital (Property). Mr Bird has over 25 years of experience in the property sectors in Australia, UK and the Asia Pacific. Prior to that, he held property management roles at APN Funds Management, Colonial First State and Potter Warburg Asset Management. He has also worked with property agents Richard Ellis (Melbourne and Jakarta) and PTS Widjojo in Jakarta.

We view this appointment as positive for AAREIT. Given Mr Bird‟s expertise in the property and property fund management business, we believe he will be able to provide valuable insights and guidance into steering the growth of AAREIT over the next two years.

Portfolio update
We note that a significant chunk of its portfolio leases will expire over the next 12 months (c39% expiry in FY13, mainly at 8 & 10 Pandan Crescent), which presents the opportunity for more positive rental reversions. The master lease at 8 & 10 Pandan Crescent expired on 18 Apr 2012.

Fig2: Lease expiry profile

Redevelopment of 20 Gul Way remains on track and within budget, with potential completion of Phase 1 targeted by the end of 2012. AAREIT announced the implementation of a distribution reinvestment programme to provide unit holders with the option to reinvest their distributions at a slight discount to market.

 SCB Coverage (April12).pdf