ASCENDAS REAL ESTATE INV TRUST
A17U.SI
Ascendas REIT - 3QFY3/18: In-line Results; New Captain At The Helm
- Ascendas REIT (AREIT)'s 9MFY18 DPU of 12.078 Scts (+1.6% y-o-y) was in line with consensus and our expectations at 76% of our full-year forecast. 3QFY18 DPU of 3.97 Scts was at 25%.
- Mr William Tay, who is deputy CEO of Singapore and SEA for ASB, and concurrent CEO of South Korea, is the new CEO of the manager of AREIT.
- 3Q results were stable. Portfolio occupancy dipped 0.9% pt q-o-q to 91.1%. The portfolio recorded +3.1% rental reversion during the quarter.
- We raise our FY19F-20F DPU by 0.5% as we factor in the acquisition of 108 Wickham St and divestment of 84 Genting Lane.
- Upgrade to ADD. Downside risk is a turn in investor sentiment.
3QFY18: in-line results
- Ascendas REIT (AREIT)'s 3QFY18 DPU dipped 0.6% y-o-y due to one-off tax credit in the prior year (reversal of deferred tax provisions subsequent to the divestment of the Chinese properties).
- NPI rose 1.7% y-o-y due to 12, 14 and 16 Science Park Drive, 50 Kallang Ave (redeveloped for S$45.2m and fully leased to Schneider Electric) and 100 Wickham St in Australia (acquired on 25 Sep 2017).
New captain at the helm
- Mr William Tay (49), who is deputy CEO of Singapore and Southeast Asia for the Ascendas-Singbridge Group (ASB), and concurrent CEO of South Korea, has been appointed CEO of the manager of AREIT with effect from 1 Feb 2018.
Portfolio occupancy dipped 0.9% pt q-o-q to 91.1% in 3QFY18
- Singapore occupancy declined 1.3% pt q-o-q to 88.8% due to lower occupancies at 40 Penjuru Lane, Techpoint and The Alpha. Singapore multi-tenanted building (MTB) occupancy (same store) declined 1.7% pt q-o-q to 84.5%.
- Australia occupancy fell by 2% pt q-o-q to 98.5% due to the termination of a licence space at 162 Australis Drive (Melbourne).
Portfolio rental reversion was +3.1%
- Singapore recorded 5.8% rental reversion for the quarter, with business and science parks recording a healthy +6.6% reversion. One lease in Australia was renewed at 1% lower than the preceding average rent.
Investment management
- Ascendas REIT (AREIT) acquired 108 Wickham St on 22 Dec 2017 for total cost of A$113.9m, or 6.1% NPI yield. The property is 100% occupied and has a WALE of 6.7 years. The acquisition is fully debt-funded, resulting in an increase in gearing to 35.1% (2QFY18: 33.1%).
- Post 3QFY18, AREIT divested 84 Genting Lane for S$16.7m.
- It also made a forward purchase of a speculative logistics facility in Brisbane (developed by Goodman) for A$30m. Given the cap rate compression in Australia, AREIT would also look for greenfield opportunities.
Upgrade to ADD with a higher DDM-based Target Price
- We trim our FY18F DPU by 0.1% and raise our FY19F-20F by 0.5%. We factor in the acquisition of 108 Wickham St and divestment of 84 Genting Lane. We also raise our target price (to S$2.88) as we roll forward our DDM-based valuation and lower COE to 7.9% (prev 8%).
- We believe that a figurehead could re-affirm investors’ confidence, while noting that AREIT, which has lagged peers in terms of acquisitions, has scope for inorganic growth (S$0.8bn debt headroom assuming 40% cap on gearing).
- Upgrade to ADD from Hold.
YEO Zhi Bin
CIMB Research
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LOCK Mun Yee
CIMB Research
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http://research.itradecimb.com/
2018-01-25
CIMB Research
SGX Stock
Analyst Report
2.88
Up
2.720
