Ascendas REIT
ASCENDAS REAL ESTATE INV TRUST
A17U.SI
Ascendas REIT - Positioned for steady growth
- FY16 DPU of 15.36 Scts (+5.2% yoy) met consensus and our forecasts at 102% of our FY16F.
- 4QFY16 DPU of 3.41 Scts (-8.1% yoy) formed 23% of our FY16F.
- Buoyed by acquisitions, income available for distribution rose 7.7% yoy for 4QFY16. Booked a net revaluation loss of S$6.9m, mainly due to Australia.
- +5.1% rental reversion in the quarter. Portfolio occupancy dropped 1.6% pts qoq to 87.6%. WALE stood at 3.7 years, with 19.4% of revenue up for renewal.
4QFY16: buoyed by acquisitions
- Buoyed by acquisitions of The Kendall, the Australian portfolio and ONE@Changi City, 4QFY16 income available for distribution rose 7.7% yoy to S$89.1m.
- Additionally, the group achieved +7% rental reversion for FY16 and +5.1% for the quarter. The positive rental reversion was registered across all segments.
- 4QFY16 DPU declined 8.1% yoy due to the performance fees of S$9m and a larger unit-base.
Investment management and capital recycling
- In FY16, AREIT completed c.S$1.5bn of acquisitions (the Australian portfolio, 6-20 Clunies Ross Street and ONE@Changi City), c.S$44m of development projects (DBS Asia Hb Phase 2 and Jiashan Logistics Centre) and c.S$96m of AEIs.
- It also sold 26 Senoko Way and BBR Building for S$38.7m and realised S$15.8m in capital gains. In Apr 16, the manager sold Four Acres Singapore to Unilever Asia for S$34m, c.11% higher than the development cost.
Portfolio occupancy dropped 1.6% pts qoq to 87.6% in 4Q16
- The fall stemmed from Jiashan Logistics Centre, which was completed in Mar 16 and unoccupied. 34% of its space is under negotiation.
- Singapore occupancy declined 1% pts qoq to 87.9% due to the single tenant lease expiry at IDS Logistics Corporate HQ.
- Excluding IDS, Singapore occupancy stood at 88.7%.
- Occupancy in Australia was stable at 94.7%.
Leasing update – Singapore
- Portfolio WALE stood at 3.7 years, with 19.4% of gross revenue due for renewal in FY17. In Singapore, 21.3% of gross revenue is due for renewal, the typical annual average for AREIT.
- 3.1% of Singapore gross revenue pertains to seven STBs (NLA c.100,000 sq m).
- One of the STB leases has been renewed, three likely to be renewed and three under negotiation.
- With market rate slightly above passing rental for most of the MTB leases due for renewal, we project flat or low-single digit rental reversion.
Positioned for steady growth; upgrade to Add from Hold
- With the full-year effect of acquisitions to be felt in FY17, we expect AREIT to deliver 2.1% DPU growth vs. flat or DPU declines for the other industrial S-REITs.
- We believe that the group will focus on enhancing its Australia portfolio in FY17, shoring up the portfolio with 1-2 complementary acquisitions.
- Given the recent retracement in share price, we upgrade the stock to Add from Hold, with a higher DDM-based target price (S$2.52).
- We factor in a higher LTG of 2.5% (prev. 2%) as there is no business park supply after 2016.
YEO Zhi Bin
CIMB Securities
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LOCK Mun Yee
CIMB Securities
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http://research.itradecimb.com/
2016-05-06
CIMB Securities
SGX Stock
Analyst Report
2.52
Up
2.41
