Ascendas REIT - Phillip Securities 2017-07-28: Acquisitions Deliver Strong Set Of Results

Ascendas REIT - Phillip Securities 2017-07-28: Acquisitions Deliver Strong Set Of Results ASCENDAS REAL ESTATE INV TRUST A17U.SI

Ascendas REIT - Acquisitions Deliver Strong Set Of Results

  • Ascendas REIT (A-REIT) 1Q18 gross revenue and DPU in line with our forecast.
  • Overall portfolio achieved blended +1.7% renewal rate, from positive blended rental reversions for both Singapore and Australia portfolios.
  • QoQ higher overall portfolio occupancy from 90.2% to 91.6%; driven by both Singapore and Australia portfolios.

The positives 

  • Positive renewal rates for overall portfolio: +1.1% and +3.5% blended rental reversions for Singapore and Australia portfolios, respectively.
  • QoQ higher occupancy for Singapore portfolio: Higher occupancies at 50 Kallang Avenue (completed asset enhancement initiative for single-tenant), 40 Penjuru Lane and Pioneer Hub. Backfilling of space came about from new tenants and existing tenant expansion.
  • New leases lifted Australia portfolio occupancy: Both 62 Stradbroke Street and 494 Great East Highway are now fully occupied, previously 41.7% and 58.5% occupied, respectively.
  • Total portfolio WALE remains stable at 4.3 years: A blend of 5.5 years for Australia and 4.2 years for Singapore.

The negatives 

  • Negative reversions for certain segments of the Singapore portfolio: Hi-Specs Industrial - 0.7%, Light Industrial -4.0% and Logistics & Distribution Centres -2.0%.


  • The outlook is stable. There are no leases expiring in Australia for the remainder of the year. 13.3% of Singapore leases by gross revenue expiring in the remainder of the year.
  • Some negative reversions are to be expected from the Singapore portfolio, but offset by the portfolio rebalancing strategy. We expect recent acquisitions to drive gross rental growth in FY18e. 
  • There will not be any further unit dilution from the Exchangeable Collateralised Securities (ECS) as it has been fully converted in FY17. 
  • Ascendas REIT (A-REIT) has a healthy aggregate leverage of 33.9%, allowing it to embark on further acquisitions.

Maintain Accumulate with unchanged target price of $2.86 

  • We expect a stable 5.8% yield and our target price gives an implied FY18e P/NAV multiple of 1.35x, which compares against the FTSE REIT Index forward 12-months P/NAV multiple of 1.06x.

Relative valuation 

  • A-REIT is trading above the peer average P/NAV multiple and at a lower 12M-trailing yield than the peer average.

Investment highlights 

  • 50 Kallang was decommissioned to facilitate the asset enhancement initiative (AEI) for a single-tenant. The AEI was completed during the quarter and handed over to the tenant.
  • 52 Fox Drive was acquired during the quarter and contributed to the growth in gross revenue.

Richard Leow Phillip Securities | http://www.poems.com.sg/ 2017-07-28
Phillip Securities SGX Stock Analyst Report ACCUMULATE Maintain ACCUMULATE 2.860 Same 2.860