4 Things You Should Know About AIMS APAC REIT

AIMS APAC REIT is one of Singapore's smaller REITs with a market capitalization of $833 million. It is a relatively young industrial REIT that was listed on the SGX market in 2007. They started with an initial portfolio of only $316 million and has now grown to a relatively large diversified portfolio worth $1.5 billion. AIMS APAC REIT is an industrial REIT that primarily owns industrial hubs across Singapore and Australia. Due to the COVID-19 pandemic, the share price of AIMS APAC REIT decreased from $1.45 to the current price of $1.18. It is one of the less known REITs in Singapore among investors but I feel that it has great potential and great upside. Here are 4 things you should know about AIMS APAC REIT. 

 

Attractive Dividend Yield and 10-year Dividend History

AIMS APAC REIT has a consistent 10-year dividend history which is very impressive for a small REIT. This means that they have been paying out dividends to shareholders without fail consecutively for 10 years. This is a good sign of a stable REIT that attracts dividend investors as it reflects efficient capital management of the REIT. Moreover, AIMS APAC REIT has a very attractive dividend yield compared to the average blue-chip REIT. The 5-year average dividend yield for AIMS APAC REIT is 9.1% which is much higher compared to blue-chip REITs (4-5%). This is an advantage of buying smaller REITs in Singapore as they offer a higher dividend yield with slightly more risk. However, their distribution per unit decreased from 10.25 cents in FY19 to 9.5 cents in FY20 due to prudent capital management in the COVID-19 pandemic. Nevertheless, this is only a slight decrease in distribution per unit and is still relatively high compared to blue-chip REITs. I am more than confident AIMS APAC REIT will be able to resume their usual distribution per unit once the COVID-19 crisis tides over. They have been able to sustain a high distribution per unit consistently for the past 10 years. 

Strong Sponsor

AIMS APAC REIT is sponsored by AIMS Financial Group. AIMS Financial Group is a diversified financial services and investment group. Their operations include mortgage lending, investment banking, fund management, property investment, venture capital, and many more. AIMS Financial Group is solely responsible for the turnaround of AIMS APAC REIT which was formerly known as MacarthurCook Industrial REIT. A strong sponsor such as AIMS Financial Group can provide financial stability to the REIT and help it in times of financial difficulty.  This lowers the risk of the REIT running into cash flow problems or serious financial issues. This can be seen from how AIMS Financial Group managed to turn a distressed MacaruthurCook Industrial REIT in 2009 to a current successful AIMS APAC REIT with $1.5 billion worth of assets. The strong sponsor by AIMS Financial Group certainly boosts investors' confidence in AIMS APAC REIT. You can read more about the history of AIMS APAC REIT below.

Diversified Tenant Portfolio and High occupancy rate

AIMS APAC REIT portfolio consists of 27 properties across Singapore and Australia with a total worth of $1.5billion. It has an extremely well-diversified tenant portfolio with the top 10 tenants contributing only 50.5% of its gross rental income. No one tenant is responsible for a significant amount of its gross rental income. Furthermore, its tenants come from many different industries and more than 50% of the tenants operate in essential services. The diversity of the AIMS APAC REIT tenant portfolio helps to protect it during difficult financial times such as the current COVID-19 pandemic. It will not be significantly affected if any one tenant decides not to renew its rent. Also, AIMS APAC REIT has a high occupancy rate of 93.6% for its Singapore properties and 89.4% for its Australian properties which is comparable to other blue-chip REITs in Singapore. This means that they can maximize their properties to generate as much income as possible. This would then be transferred to shareholders in the form of higher dividends. 

Appropriate Debt Gearing Ratio

AIMS APAC REIT has a debt gearing ratio of 35.4% for FY21 which is well within the appropriate debt gearing ratio (<40%). REITs often use debt as leverage to acquire more properties to expand their portfolio at a faster rate. The weighted average debt maturity for AIMS APAC REIT is 2.2 years and they have no further debt due till November 2021. The management has managed to structure its debt payments such that no significant amount of debt is due in any year. AIMS APAC REIT has a history of excellent capital management which can be seen from how it was transformed from a distressed REIT in 2009 to an excellent industrial REIT in 2020. Additionally, AIMS APAC REIT has a strong balance sheet with net assets worth $960 million and total liabilities at $726 million as of 30 June 2020. AIMS APAC REIT's excellent management by AIMS APEC REIT MANAGEMENT LIMITED gains investors' trust as a stable proven industrial REIT in Singapore.

Verdict

In my opinion, I feel that AIMS APAC REIT is currently a bargain at its current share of $1.18 and a price to book value of 0.88. I feel that the REITs scene in Singapore is slowly shifting from commercial/retail REITs to Industrial/Logistics REITs due to the boom of e-commerce and online shopping. This is especially evident during this COVID-19 pandemic where the commercial/retail REITs were hit extremely hard while the industrial REITs were only slightly affected. Smaller REITs such as AIMS APAC REIT can offer dividend investors higher dividend yields at a slightly higher risk. I feel that the tradeoff is definitely worth it if you have done your research and know that it is a solid stable REIT. 

Source: AIMS APAC REIT First Quarter Results 2021

What are your thoughts on the future REITs scene in Singapore?