Ascendas REIT
ASCENDAS REAL ESTATE INV TRUST
A17U.SI
Ascendas REIT - Optimising portfolio returns
- Divesting assets in China; proceeds of S$186m for two properties are above cost.
- Gearing to head down towards c.36%.
- Realigning portfolio to key markets of Singapore and Australia with larger scale; China strategy remains opportunistic.
- BUY, TP S$2.50 maintained.
What has happened?
Strategic divestments in China; reaping proceeds of S$186m.
- A-REIT has announced the divestment of Jiashan Logistics Centre in China for S$26m (RMB 125m) to Goodman Developments Asia and GCLP Developments No. 3 (BVI) Limited. A-REIT is expected to realise a gain of about S$5.1m from this sale over the development cost.
- This comes on the back of the recent divestment of Ascendas Z-Link in China for S$160m (RMB 760m), which represents a significant gain above the original price of S$62m paid in 2011.
Our thoughts
Improved financial metrics.
- Gearing will reduce to to around 36.0% from 37.2% post the sale of these 2 properties, assuming that A-REIT repays existing debt.
Realignment of portfolio to markets of scale.
- While not sizeable in nature, the divestments are positive as it will enable A-REIT to realise value for its investments in China, enabling the REIT to channel the proceeds to other sources.
- It also streamlines its portfolio to its key markets of Singapore and Australia in which it has operational scale.
- While China remains a market that management remains keen on investing, the lack of sizeable investments will mean that the REIT is likely to struggle with efficiencies.
BUY, TP S$2.50.
- We continue to like A-REIT for its consistent delivery of acquisitions while its diversified portfolio of properties is expected to demonstrate resiliency in times of economic uncertainty.
Derek Tan
DBS Vickers
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Mervin Song CFA
DBS Vickers
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http://www.dbsvickers.com/
2016-06-10
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SGX Stock
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