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

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 

3QFY16 results met our expectations 

  • 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. 

CEO to retire on 31 Mar 

  • 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. 

Maintain BUY 

  • 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
OCBC Securities SGX Stock Analyst Report BUY MAINTAIN BUY 2.50 Same 2.50