Ascendas India Trust (AiT) has refinanced its short-term debt facility at higher than projected rates. This hike is estimated to negatively impact our FY10-11F DPU projections by up to 3%. Looking ahead, the larger drag on distributions, in our view, will come from a new effective SGD-INR forward rate that is 15% lower than the previous hedged levels. AiT currently offers a FY09F – 11F DPU yield of c12-14%. Maintain HOLD, TP $0.51 based on DDM.

Higher interest cost cut DPU by up to 3%. AiT has refinanced its short-term facilities, amounting to S$50m @ SOR + 600 bps (7.04% total interest cost), which is a 540 bps spike compared to its existing rate and above our projections of c.6.0%. Impact on DPU is estimated to be up to 3% given its (i) relatively small quantum, (ii) initial interest capitalization for construction of its buildings. As such, our FY10-11F DPU estimates are adjusted downwards to 6.0 Scts and 7.3 Scts respectively.

FX exposure remains our concern. In our view, a major impact on AiT’s forward DPU performance will hinge on the movement in INR in relation to the S$. Though management has engaged in periodic currency forwards to limit the impact of the weakening exchange rate, forward rates locked in from March’09 onwards are 15% lower than initially secured.

HOLD, TP $0.51. Given AiT’s inherent exposure to INR-S$ exchange fluctuations, at 0.5x P/BV, we view its current valuation as rich when compared to its S-reit peers (average 0.4x P/BV). Stock price performance is unlikely to outperform in the near term, given a weak INR-S$ exchange outlook. Maintain HOLD, TP adjusted to $0.51 based on DDM.