a-iTrust 2010 profit down 4% to S$70.6mn

Yet the company’s revenue growth continued in FY2010/11 to S$121.5mn or 1% increase behind a steady performance from its basic portfolio.

Ascendas Property Fund Trustee Pte Ltd, the Trustee-Manager of Ascendas India Trust (“a-iTrust”), on Wednesday reported the results of a-iTrust for the fourth quarter and full financial year ended 31 March 2011 (“4Q FY2010/11” and “FY2010/11” respectively). a-iTrust’s revenue growth continued in FY2010/11, attributable to a steady performance from its underlying portfolio. For FY2010/11, total property income was S$ 121.5 million or 1% higher than the previous financial year. In Indian Rupee terms, total property income for FY2010/11 increased by 4%.

Total property income recorded for 4Q FY2010/11 was S$ 31.1 million or 4% higher than the preceding quarter, due to the initial income contribution from Zenith, a newly completed IT Multi-tenanted Building (“MTB”) in International Tech Park Chennai (“ITPC”).

Net property income for FY2010/11 was S$ 70.6 million, which decreased 4% from last year, while net property income for 4Q FY2010/11 decreased by 3% from the quarter before. This was mainly due to higher property expenses from the recent expansion of the operating portfolio with the completion of developments in the existing parks, and the increase in fuel and electricity costs. With tenants beginning to take possession of and fitting out the new units, we expect the additional property expenses to be progressively compensated by higher property income over the coming quarters, according to a a-iTrust report.

Distributable income for FY2010/11 was S$ 50.3 million, which represented a decrease of 13% over last year. This was mainly due to the decrease in net property income mentioned above and a realised loss of S$ 0.8 million from the settlement of forward foreign exchange contracts in FY2010/11, compared to a corresponding gain of S$ 2.8 million last year.

Distributable income for 4Q FY2010/11 decreased by 13% from the preceding quarter, as a result of the lower net property income described above and higher cost of financing now recognised in the income statement with the completion of the new developments. During construction, such financing costs were capitalised. As a result, full-year DPU decreased to 6.58 Singapore cents. The full-year DPU represented a yield of 6.9% and 6.8% respectively over the closing prices of S$ 0.955 and S$ 0.965 per unit on 31 March 2011 and 26 April 2011. DPU for 4Q FY2010/11 was 1.50 Singapore cents. Taking into account the DPU of 1.72 Singapore cents for the preceding quarter, DPU for the second half of FY2010/11 is 3.22 Singapore cents, which is payable on 25 May 2011. a-iTrust units will trade exdistribution on 11 May 2011. Gearing decreased to 18% as at 31 March 2011 from 19% as at the preceding quarter, due to a loan repayment in 4Q FY2010/11. Net asset value attributable to Unitholders was S$ 0.80 per unit.

Chief Executive Officer of the Trustee-Manager, Mr Jonathan Yap said, “In the past year, we focused on a balance between achieving stability of the distribution from our existing portfolio and investing in future growth. We had about 33% 3 of the leases expired over the course of FY2010/11, which have been successfully renewed or replaced with new leases. As a result, average portfolio occupancy stayed high at the 97% 4 level as at 31 March 2011.

Such leasing activities were carried out during the same time when Zenith in ITPC and Park Square, a retail mall in International Tech Park Bangalore (“ITPB”), were being completed and actively marketed. Leasing of the remaining space in the two new buildings is ongoing, and their income contributions will be felt progressively over the coming quarters. In addition, the portfolio is set to grow further in mid 2011 with the expected completion of Voyager, the first building within ITPB’s Special Economic Zone (“SEZ”). Despite being a few months away from target completion date, tenancy commitment level is already at 68% as at 27 April 2011.

Aside from growing within our existing portfolio, we have also demonstrated our ability to grow through external acquisitions, with the signing of a conditional agreement to purchase a portfolio of 5 buildings in Hitec City 2, an IT/ITES 5 SEZ in Hyderabad. The property will subsequently be rebranded as “aVance Business Hub”. The acquisition is expected to be immediately accretive to Unitholders’ distribution.

Our growth strategy has been supported by a healthy financial standing, with our gearing level at 18% 2 as at 31 March 2011. As the global economy continues to pose an uncertain outlook, we remain cautiously optimistic of the future. We will continually assess the risks and opportunities that lie ahead, and look forward to embarking on our next phase of growth through development and acquisition at the appropriate terms and timing.”

A Well-Diversified Portfolio with High Occupancy
a-iTrust’s portfolio of 5.9 million sq ft of completed space is fairly evenly distributed among Bangalore, Chennai and Hyderabad. a-iTrust’s properties are today home to a total working population of 66,000 people from 266 tenants, comprising mainly corporate tenants operating in various IT sub-sectors such as software development, business process off-shoring, research and development, and data centres. While their operations in our properties are IT-related, our tenants’ underlying businesses are diverse, such as financial services, IT services, manufacturing and pharmaceutical. As at 31 March 2011, the largest tenant contributed about 4.7% of the portfolio base rent, while the top 10 tenants collectively accounted for about 31% 6 of portfolio base rent, further demonstrating the low client concentration and diversified income base.

Occupancy rate for the portfolio as at 31 March 2011 was 97% 4. This exceeds market occupancy rates of 60% to 97% for the micro-markets in which the portfolio’s properties are located. 89% of our tenants are multi-national corporations. Our tenants appreciate the“Ascendas Advantage” that comes with the portfolio being managed by the Ascendas Group. By that, we refer to quality space, reliable solution and international business lifestyle. Hence, in addition to ensuring that the space continues to meet our customers’ requirements, a host of services and amenities are provided to develop a sense of community belonging within each park. For instance, 22 events were organised during the year for the users at our parks. Of these, 4 were held in the past quarter, such as the Celebration of Colours held at ITPC in January 2011 and Healthy Lifestyle & Sports Meet 2011 held at ITPB in February 2011. 

In an annual tenant survey conducted by Nielsen, 88% of respondents indicated that they were satisfied, while 65% expressed delight with the overall management of our parks.

Future Growth
a-iTrust’s existing portfolio includes about 1.2 million sq ft which have recently been completed in December 2010, being Park Square (450,000-sq ft retail mall in ITPB) 9 and Zenith (737,000-sq ft IT MTB in ITPC). Tenancy commitment levels for Zenith and Park Square were 42% and 61% respectively as at 27 April 2011. The occupancy levels of the new buildings and the resulting financial benefits are expected to ramp up over the upcoming financial quarters.

An ongoing development, Voyager (535,000-sq ft MTB in ITPB’s SEZ), is expected to complete in mid-2011 and set to increase the portfolio size to 6.4 million sq ft. Upon completion of the proposed acquisition of the first 2 operating buildings at aVance Business Hub in Hyderabad (total 0.4 million sq ft), portfolio size will expand further to 6.8 million sq ft. Both buildings are currently 100% occupied. Through the transaction, we have the option to acquire up to 3 additional buildings (total 1.8 million sq ft) when individually completed and required occupancy levels met, potentially bringing our total portfolio size to 8.6 million sq ft.

Further space could be developed within the portfolio, which is largely within the SEZ in ITPB. Following the strong pre-commitment of Voyager ahead of its completion, a second 540,000-sq ft MTB is being planned and expected to complete around end-2013. There is a further development potential of 2 million sq ft thereafter.

a-iTrust enjoys 2 Right of First Refusal (“ROFR”) arrangements with Ascendas Land International Pte Ltd (“ALI”), the Sponsor, and Ascendas India Development Trust (“AIDT”) to acquire substantially income-producing business space. Collectively, the ROFR comprise over 10 million sq ft of business space potential under various stages
of development in key cities in India such as Chennai, Pune, Gurgaon and Coimbatore.

In addition, up to 4 further buildings with a total 2.35 million sq ft could be acquired in aVance Business Hub, in respect of a ROFR with the owners of the land. In addition to acquiring via ROFR, the Trustee-Manager seeks to also acquire from the market.

As at 31 March 2011, a-iTrust’s total borrowings stood at S$ 165.9 million, reflecting a 18% 2 gearing (loan-to-value). This level of gearing allows a-iTrust the flexibility to fund growth via development or acquisition using debt or equity, whichever more commercially viable at the time. At the current gearing level, the trust has an additional debt capacity of S$ 150 million or S$ 370 million before its gearing reaches 35% or 60% (loan-to-value) respectively.

Looking Forward
The India economy grew 8.2% in the quarter ended 31 December 2010, and the India Government had estimated GDP growth to be between 8.75% to 9.25% for FY2011/12. We are focused on positioning the trust to further create value for Unitholders by leveraging on India’s growth. The Trustee-Manager will continue to focus on growing the operating earnings of its assets by actively managing the portfolio, optimising its capital structure, and further growing the portfolio through developing the land it owns and pursuing acquisitions.