Ascendas REIT - RHB Invest 2016-05-06: 4QFY16/17 Results Flash Note

Ascendas REIT - RHB Invest 2016-05-06: 4QFY16/17 Results Flash Note Ascendas REIT ASCENDAS REAL ESTATE INV TRUST A17U.SI 

Ascendas REIT: 4QFY16/17 Results Flash Note 

  • We make no change to our BUY rating, forecast and DDM-derived TP (CoE: 7.5%, Tg: 1.5%) of SGD2.63, FY17 dividend yield of 6.6%


  • 4QFY16/17 DPU increased 1.3/5.2% YoY, meeting c.97%of our full year forecasts. 
  • Performance drivers were mainly due to new acquisitions, and increase in overall occupancy. 
  • Overall portfolio rental reversion at 5.1% - mainly driven by its logistics centres 
  • SG portfolio cap rate compressed to 6.30%, against 6.46% in prior year. 

Other takeaways 

  • Management expects the outlook for the industrial market remains challenging, however, they are confident in delivering stable results as its portfolio is widely diversified. 
  • SG portfolio occupancy declined to 88%, mainly due to a single tenant lease expiry (IDS logistics). 
  • Its source of new demand in the last quarter (by % of gross income) came mainly from transport & storage, and IT sectors. 
  • On its rental reversion breakdown: 
    • Business & Sci Parks: 6.6% 
    • Hi-Specs Industrial: 5.2% 
    • Light Industrial: 2.1% 
    • Logistics centres (Warehouses): 7.4% 
  • Only a mere 3.1% of its SG Portfolio constitutes single tenant users buildings in the new FY. While it has only 1.5% of its leases facing expiry in FY17/18. 
  • Gearing ratio stood at 37.2%, with a healthy interest coverage of 5.5x. 

Our View

  • We continue to be optimistic in the REIT as it is the best proxy to the highly resilient business park space. In addition, its recent acquisitions in Australian proved to provide stability in the overall portfolio. 
  • Its risks of conversion to multi tenanted buildings are much minimised as compared to its peers. 
  • Lastly, its expiring leases are below market rents, which would provide organic growth for the REIT. We maintain Buy with potential total return of 16.2%.

Ivan Looi RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-06
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 2.63 SAME 2.63