Ascendas REIT - CGS-CIMB Research 2018-10-25: Unexciting 2Q

ASCENDAS REAL ESTATE INV TRUST (SGX:A17U) | SGinvestors.io ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)

Ascendas REIT - Unexciting 2Q

  • Ascendas REIT's 2Q/1HFY3/19 DPU of 3.887/7.889 Scts were broadly within our expectations.
  • Slower pace of rental reversions; Singapore portfolio occupancy dipped q-o-q.
  • Maintain ADD, Target Price slightly lower at S$2.84.



2QFY3/19 results highlights

  • Ascendas REIT reported a DPU of 3.887 Scts for 2QFY3/19, -4.2% y-o-y despite a 1.1% rise in revenue from new acquisitions in Australia and UK, partly offset by lower occupancy in Singapore. The drag came higher operating expenses and interest costs as well as dilution from the enlarged units base post private placement.
  • For 1HFY3/19 DPU of 7.889 Scts, -2.7% y-o-y, made up 48% of our FY19F forecast, broadly in line with our expectations.



Portfolio occupancy

  • Ascendas REIT's portfolio occupancy was up 90.6%, helped by full occupancy in the UK portfolio. However, Singapore experienced a lower take-up of 87.1% (vs. 88.1% in 1Q) due mainly to non-properties.
  • Rent reversions remained positive, albeit at a slower pace of 2.3%. The uplift came from all guide for a slight improvement in rent reversions for FY19.
  • Ascendas REIT has a remaining 44% of leases expiring in 2HFY19 and another 19.3% in FY20. The bulk come from Singapore multi-tenanted assets.


Asset divestments and acquisitions

  • Ascendas REIT acquired its second UK logistics property portfolio in Oct 2018. The properties are largely located in the key logistics hub in the West Midlands area. The portfolio comprises 266,184 sqm of floor area and is 100% occupied.
  • The portfolio has an initial net yield of 5.54% based on the purchase price of S$459.2m. Contributions from this portfolio should be felt in the 2HFY3/19.


Balance sheet

  • Ascendas REIT’s gearing stood at 33.2% at the second UK portfolio.
  • Average interest cost ticked up marginally q-o-q to 85% of its debt are trust in a good position to selectively acquisition opportunities.


Maintain ADD

  • We leave our FY19-21F DPU estimates unchanged but tweak our DDM-based Target Price slightly lower to S$2.84 on a higher cost of equity assumption of 8.3%.
  • Maintain ADD rating.
  • Key catalyst includes visible organic rental growth, while downside risks include escalating trade tensions and slower demand for industrial space.





LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://research.itradecimb.com/ 2018-10-25
SGX Stock Analyst Report ADD MAINTAIN ADD 2.84 DOWN 2.890



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