Added Aims Apac Reit

In May, I blogged about trying to add Aims Apac Reit but failed. In the end, I used the funds to nibble Frasers Centrepoint Trust instead.

Today I decided to try my hands on adding Aims Apac Reit (AA Reit) again and succeeded. This will increase my holdings to 32,000 shares, making AA Reit the largest constituent of my investment portfolio.

Why did I want to add Aims Apac Reit even though it is not the strongest and best industrial Reit?

1. To reinvest dividends collected from Aims Apac Reit.

In recent quarters, there are no dividend reinvestment plans for the dividends distributed by AA Reit unlike last year. I have collected more than $1k of dividends from AA Reit and am determined to buy back units myself during a time when there is 13% discount from NAV to achieve the compounding effect by putting money where the mouth is.

2. Well managed small industrial Reit

Unlike its small industrial Reit peers such as ARA LOGOS, Sabana, ESR etc, I believe that AA Reit is well managed though several yield accretive Asset Enhancement Initiatives to increase its gross floor area i.e. redevelopment of 3 Tuas Ave 2 and Northtech in Woodlands Industrial Park E1, recent acquisitions of freehold properties in Australia i.e Boardrider HQ in Gold Coast and increasing its exposure to the resilient logistics sector through recent acquisition of 7 Bulim Street near to future Tuas Mega Port. Its divestments were value accretive as they were sold at above book values.

3. Offers value and decent yield

Unlike branded industrial Reits that yield less than 5%, AA Reit is still offering close to 7% yield while trading at 13% discount off its NAV. There is greater income stability and visibility as more than 30% of its Gross Rental Income comes from master leases with built-in rental escalations. Master lease renewal for 12 years with Optus will commence in July 2021 and the additional property income from recent acqusitions and redeveloped properties have not been factored in yet. With untapped GFA of over 500,000 sqft, there is great potential for organic growth. Hence, I believe AA Reit will be able to steadily increase its DPU back to at least 10 cents in time to come.

4. Prime acquisition target

With ESR Cayman secretly collecting shares and increasing its stakes on AA Reit, it will be no surprise that AA Reit will be acquired and delisted one day. Also with the trend of Reits consolidation in recent times, especially the most recent one involving Reits between ESR and Sabana Reits, AA Reit remains a prime acquisition or merger target sooner than later.

5. Technically stable

The share price of AA Reit has been in consolidation phase since many weeks ago. Although its 20 days MA has cut below the 50 days MA and 100 days MA, all 3 lines are horizontal with no major price movements on low volumes and does not really test its next support level at 1.14. I believe that if the 20 days MA can cut above the 50 days MA and surpass next resistance at 1.21 with high volumes, it is poised for a breakout to test 1.28 and will hover in the 1.20s range. Hence, the next quarter results will be crucial to determine its short-term future price movements.

I do acknowledge the risks in investing in AA Reit such as erosions to land lease tenures lowering NAV, small sponsor, Forex risks from AUD and so on. However, in such low interest rate environment, I believe in the need to stomach some risks in order to let monies earn decent yields.

Thanks for reading.

With Love & Peace,

Qiongster