Ascendas REIT
ASCENDAS REAL ESTATE INV TRUST
A17U.SI
Ascendas REIT - Beat Expectations
- 2Q results beat expectations on the back of stronger than expected rent reversions from business parks.
- FY16-18 DPU forecasts raised by 4-6%. Growth will largely be due to new Australian logistics assets.
- Yield target tightened by 25bp to 7%, TP raised 9.6% to SGD2.28. Maintain HOLD.
What’s New
- 2Q3/16 results beat our expectations as rent reversions were 9.1% for the quarter, ahead of our 6%.
- Business parks led the way with a whopping 13.2% reversion, while the high-spec, factory and logistics portfolios were lacklustre, between 2-5.5%.
- Overall, revenue grew 10.8% YoY, 1.2% QoQ to SGD182.6m, and NPI grew 8% YoY, -0.4% QoQ to SGD123.8m, due to the strong reversions as well as the Aperia ramping up occupancy.
- New acquisition The Kendall and smaller AEIs contributed also.
- Core-DPU grew 6.3% YoY, 1.2% QoQ to 3.89 Scts, while a one-off distribution of previous taxable income brought DPU to 4.16 Scts.
- In light of the strong reversions, we expect Areit’s rent reversion to average 7.8% from 6% this year.
- We also raise our payout ratio to 99% from 97% previously from FY3/16 onwards. The net effect sees our FY3/16-18 DPU expectations rise 4-6% to 15.2/16/16.4 Scts.
- DPU growth will largely be due to the new Australian logistics portfolio, the Aperia, and the business park portfolio.
What’s Our View
- While our expectations are raised, business conditions are still challenging with a weak economy and another year of oversupply in 2016 (22m sf vs 10m sf historical demand). 2016 however is the light at the tunnel as 2017-19 sees supply drop off to below historical demand.
- In light of Areit’s performance and improving fundamentals, we tighten our yield target 25bp to 7%, applied to FY3/17 DPU lifts our TP by 9.6% to SGD2.28.
- Maintain HOLD.
Joshua Tan
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-10-23
Maybank Kim Eng
SGX Stock
Analyst Report
2.28
Up
2.08
