Ascendas REIT
ASCENDAS REAL ESTATE INV TRUST
A17U.SI
Ascendas REIT (AREIT SP) - It Is Business This Time
- We think the One@Changi City acquisition is fairly priced, as it stands to benefit from close proximity to existing/future MRT stations and has rental growth potential (as most of the leased spaces are under the market rent rate) – Ascendas REIT is raising equity too (amounting to SGD408m), mainly to fund this exercise.
- Thus, we lower our FY16F-17F DPU by 0.6-0.9%.
- Maintain BUY with a lower SGD2.50 TP (from SGD2.55, 5% upside), implying 11.5% total returns.
Third acquisition for Ascendas REIT this year, this time a business park.
- Ascendas REIT has announced the acquisition of a 9-storey business park building, One@Changi City, for a price consideration of SGD420m. This translates into a yield of approximately 6%.
- The asset would be acquired from both parent Ascendas Development Pte Ltd and Frasers Centrepoint Ltd, which own a 50% stake each. The purchase is to be half funded by issuance of units, with the balance paid via cash.
Transaction is fairly-priced, considering the great locality.
- We think that at a 6% cap rate valuation is reasonably-priced. Bear in mind that the asset is poised to benefit from its close proximity with an existing as well as future mass rapid transit (MRT) stations.
- To put it in perspective, the average pricing of the independent valuers is SGD438m, representing a 4.2% discount to the average valuation.
Private placement priced fixed at SGD2.223 – raising a total of SGD408m.
- Ascendas REIT mentioned that the gross proceeds of at least SGD408m from the equity fundraising exercise would be mainly used:
- for the acquisition of One@Changi City (55%),
- to partially fund a potential acquisition of a logistics property in Australia (20%), and
- be used for funding debt repayments and future acquisitions (24%).
Maintain BUY with a lower SGD2.50 TP (from SGD2.55).
- As we factor in the acquisition and the larger unit base, we think that it would not be yield-accretive. In view of this, we lower our FY16/FY17 (Mar) DPU forecasts by 0.6%/0.9% respectively, resulting in a lower SGD2.50 TP.
- We maintain our BUY recommendation, as we still think there is potential upside base to our valuation.
- In addition, we like Ascendas REIT’s exposure to the business park space.
Ivan Looi
RHB Research
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Ong Kian Lin
RHB Research
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http://www.rhbinvest.com.sg/
2015-12-10
RHB Research
SGX Stock
Analyst Report
2.50
Down
2.55
