Ascendas REIT - RHB Invest 2016-07-22: 1QFY16/17 Results Flash Note

Ascendas REIT - RHB Invest 2016-07-22: 1QFY16/17 Results Flash Note Ascendas REIT ASCENDAS REAL ESTATE INV TRUST A17U.SI 

Ascendas REIT - 1QFY16/17 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, FY16/17 dividend yield of 6.3%.


Highlights

  • 1QFY16/17 DPU increased 4% YoY to 3.996 cts, meeting 25.4%of our full year forecasts.
  • Performance drivers were mainly due to contributions from the Australia Portfolio, ONE@Changi City and lower utilities expenses.
  • Overall portfolio rental reversion at 4.1%. Mgmt expects modest rental reversion in the low-single digit or flat for rest of year.


Other takeaways

  • Management expects the outlook for the industrial market to remain challenging. However, they are confident in delivering stable results as its portfolio is widely diversified.
  • SG portfolio occupancy improved to 88.3% from 87.9% in previous quarter.
  • Its source of new demand in the last quarter (by % of gross income) came mainly from from the transport and storage sector.
  • On its rental reversion breakdown:
    • Business & Sci Parks: 4.7%
    • Hi-Specs Industrial: 3.5%
    • Light Industrial: 0.5%
    • Logistics centres (Warehouses): 9.4%
    • Singapore: Weighted Average: 4.1%
    • Logistics & Distribution Centres Australia: 0.5%
  • Only a mere 2.4% of its SG Portfolio constitutes single tenant users buildings for renewal in FY16/17. Increasingly, we believe AREIT's SG portfolio at the tail-end of its Single-tenant to Mult-tenant buildings conversion cycle.
  • Australian portfolio has a relatively long lease expiry of 5.2 years with only 2.2% of Australia's gross revenue due for renewal in balance of FY16/17.
  • Gearing ratio stood at 37.0%, with a healthy interest coverage of 5.2x.
  • In 1Q FY16/17, the Manager completed two divestments - Four Acres Singapore and A-REIT Jiashan Logistics Centre (in Shanghai) for SGD34.0m and SGD25.4m (RMB 125.0m) respectively. Total capital gains of about SGD3.8m were realised over the original cost of investments.
  • On 11 July 2016, the Manager also completed the divestment of Ascendas Z-Link (in Beijing). The sale price of SGD154.7m (RMB 760m) is equivalent to 2.5x the original price of about SGD61.8m (RMB 303.7m) paid in 2011 for the property.
  • We continue to be optimistic in the REIT as it is the best proxy to the highly-resilient business park space. In addition, its previous 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 12% .




Ong Kian Lin RHB Invest | http://www.rhbinvest.com.sg/ 2016-07-22
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 2.63 SAME 2.63


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