Ascendas REIT - OCBC Investment 2018-01-26: Strong Rental Reversions In Singapore; Appoints New CEO

Ascendas REIT - OCBC Investment 2018-01-26: Strong Rental Reversions In Singapore; Appoints New CEO ASCENDAS REAL ESTATE INV TRUST A17U.SI

Ascendas REIT - Strong Rental Reversions In Singapore; Appoints New CEO

  • 3QFY18 DPU -0.6% YoY 
  • Portfolio rental reversion of 3.1% 
  • New CEO 

3QFY18 results within our expectations

  • Ascendas REIT (A-REIT) reported its 3QFY18 which met our expectations. 
  • Gross revenue rose 4.1% YoY to S$217.3m while NPI grew at a smaller magnitude of 1.7% YoY to S$157.6m. This was due largely to a 42.9% jump in property tax as there was a one-off property tax refund in 3QFY17. 
  • Topline growth was led by acquisitions and redevelopment works but partially offset by some divestments in China and Singapore. 
  • DPU fell 0.6% YoY to 3.97 S cents, attributable mainly to higher management fees and a larger unit base. 
  • On a 9MFY18 basis, A-REIT’s gross revenue rose 4.0% to S$646.4m and formed 72.3% of our full-year forecast. DPU of 12.078 S cents represented a slight increase 1.6% and accounted for 75.9% of our FY18 projection.

Singapore rental reversions came in strongly at 5.8%

  • Operationally, Ascendas REIT achieved strong positive rental reversions of 5.8% for its Singapore portfolio, with only the Logistics & Distribution Centres segment showing a decline (-2.3%). Australia saw a slight negative rental reversion of 1.0%, which culminated in an overall portfolio rental reversion of 3.1%. Portfolio occupancy came off slightly by 0.9 ppt QoQ to 91.1%.
  • Separately, Ascendas REIT also announced the appointment of its new CEO Mr. William Tay, who is presently the Deputy CEO (Singapore & South East Asia) and CEO (Korea) of A-REIT’s sponsor, Ascendas-Singbridge Pte Ltd. This would take effect from 1 Feb this year. Having worked at the sponsor, we expect the integration to be smooth.

Capital recycling strategy continues

  • Ascendas REIT’s recent property transactions included the acquisitions of No. 108 Wickham Street for a purchase consideration of A$106.2m (~S$109.0m; initial NPI yield of 6.5% pre- transaction cost) and 1-7 Wayne Goss Drive in Queensland for a land and development cost of A$30m (~S$30.8m; expected NPI yield of 6.7% upon completion), as well as divestment of No. 84 Genting Lane for S$16.7m. 
  • We factor these transactions in our model, and our FY18 and FY19 DPU forecasts are raised by 0.1% and 0.3%, respectively. Correspondingly, our fair value estimate inches up from S$2.67 to S$2.69. 

Andy Wong Teck Ching CFA OCBC Investment | http://www.ocbcresearch.com/ 2018-01-26
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 2.69 Up 2.670