Ascendas REIT - OCBC Investment 2016-01-25: Robust performance

Ascendas REIT ASCENDAS REAL ESTATE INV TRUST A17U.SI

Ascendas REIT: Robust performance

 3QFY16 DPU jumped 9.9% YoY

 Positive rental uplift of 7.3%

 Occupancy boosted by Australia

Ascendas REIT (A-REIT) reported a solid set of 3QFY16 results which came in within our expectations.

Gross revenue grew 12.9% YoY to S$193.8m, underpinned by contributions from its acquisition of the Australian Portfolio and the Kendall, positive rental uplifts on lease renewals and higher occupancy at certain properties.
DPU rose 9.9% YoY to 3.946 S cents.
On a 9MFY16 basis, A-REIT’s gross revenue increased 11.5% to S$556.9m and this formed 75.3% of our FY16 forecast; DPU of 11.947 S cents represented an increase of 9.7%.
Excluding a one-off S$6.5m distribution declared in 2QFY16, adjusted 9MFY16 DPU constituted 76.8% of our full-year projection.

Separately, A-REIT announced that its CEO Mr Tan Ser Ping would be retiring with effect from 31 Mar this year.
Mr Chia Nam Toon, who is currently the CFO and Chief Corporate Officer of the Ascendas-Singbridge Group, will succeed Mr Tan. Mr Tan will take on the role of Advisor to the A-REIT Board for 12 months from his retirement to ensure a smooth transition.

A-REIT enjoyed a robust leasing cycle in 3QFY16, delivering a 7.3% increase for its renewal rates as compared to its previous contracted rates. This was broad-based across all its segments.
Approximately 6.2% of A-REIT’s revenue is due for renewal for the remainder of FY16 and management expects moderate positive rental reversions.
For the full-year, A-REIT has kept its mid-single digit rental reversion guidance.
Its portfolio occupancy inched up 0.2 ppt QoQ to 89.2%, and this was largely aided by its recently acquired Australian Portfolio (94.4%), while there was a decline in occupancy for its Singapore (-0.9 ppt QoQ to 88.9%) and China portfolio (-3 ppt QoQ to 67.6%).
We maintain our forecasts, BUY rating and S$2.50 fair value estimate on A-REIT.
The stock is currently trading at an attractive FY16F P/B ratio of 1.04x and distribution yield of 7.0%.

Wong Teck Ching Andy CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-01-25

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