SGD New Issue Review : ASCENDAS INDIA TRUST 5YR 4%
ASCENDAS INDIA TRUST 5YR SGD
NEW ASCENDAS INDIA TRUST SGD 5YR ANNOUNCED FOLLOWING
PRICE GUIDANCE: 4% AREA
AITSP 3.50% 2016 2.85% 101.35
AREIT 2.50% 2019 2.47% 100.125
AREIT 4.00% 2022 3.33% 104.40
SGREIT 3.50% 2021 3.16% 102.00
SUNSP 3.35% 2020 3.07% 101.40
One Ascendas is not another. Ascendas India Trust (AIT) is an unrated business trust (not Reit) that bears the Ascendas name and label and 20% owned by JTC. Note that A Reit is a proper Reit and is rated A3 by Moody’s.
India has enjoyed a huge rebound in sentiments this year despite the little correction they suffered in recent months. And I always thought that India real estate yields should be higher given their deposit rate is >8% and yet Ascendas India is paying less than A Reit in dividends (5.8% vs 6.07%)!
On paper, their balance sheet is impeccable and their leverage is lower than some Reits out there whilst their Debt/Asset ratio is only a paltry 19.27%, giving them lots of room to grow.
At 4% for 5 years, which represents a premium of 2.35% over the 5 year interest rate ? It certainly looks better than A Reit’s 2.5% flat and absolute yield for the same tenor and begs the question of why the A Reit’s dividend rate – bond yield spread is so wide ? And should we be looking to buy the equity ?
Back to AIT. The price is not unfair even if it lacks a credit rating vs Suntec’s Baa2 which allows them to pay just 3% for 5.5 years. Yet on recent analysts recommendations, Stanchart just downgraded them to “underperform”.