Ascendas REIT - Maybank Kim Eng 2015-10-23: Beat Expectations

Ascendas REIT - Maybank Kim Eng 2015-10-23: Beat Expectations 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 | http://www.maybank-ke.com.sg/ 2015-10-23
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 2.28 Up 2.08