Ascendas REIT - Maybank Kim Eng 2019-04-30: Growth From A Broader Base

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

Ascendas REIT - Growth From A Broader Base

AREIT 4Q19 in line w/MKE, consensus; Sector top pick

  • Ascendas REIT (SGX:A17U)’s DPU increased 1.2% y-o-y in 4Q19, while headline DPU of SGD4.14cts rose 6.1% y-o-y from a capital distribution.
  • DPU growth was driven by contributions from its Australian and UK acquisitions, and better Singapore occupancies with the completed 20 Tuas Ave redevelopment.
  • Our DPUs are slightly changed (-1%) and our DDM-based Target Price increases 3% to SGD3.20 as we roll forward to FY20 (COE: 7.1%, LTG: 2.0%).
  • We see risk of near-term profit taking given the strong Ascendas REIT share price performance but we remain positive longer-term with the shares offering a total return of 12% in FY20E (DPU 5.5% and Target Price upside 6%).



Singapore recovery underway, AEI picks up

  • Ascendas REIT's portfolio occupancy improved q-o-q from 91.3% to 91.9% on stronger Singapore occupancies (up from 87.3% to 88.3%).
  • Ascendas REIT reported a +6.6% rental reversion for leases in its multi-tenanted buildings renewed during 4Q19 and +3.7% for FY19, up from +0.5% in FY18. Positive reversions were achieved across all segments, led by its business and science parks (+4.8%), logistics and distribution centres (+9.7%), and integrated development, amenities and retail (+8.5%).
  • Ascendas REIT will initiate SGD56.5m in redevelopment and AEI works between FY20-22 across five assets.


Overseas diversification gains traction

  • Its overseas assets, with their long WALEs (Australia: 4.5 years, UK: 9.3 years) were 17.9% of NPI, and set to grow. We see positive reversions in Australia, supported by strong demand fundamentals; 8.0% of its gross rental income is due for renewal in FY20 with 74% from its assets in Sydney.
  • In Singapore, management is guiding for reversions to be flat in FY20 from high supply, against our expectation of a steady recovery.


Fundamentally the best sector pick






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-04-30
SGX Stock Analyst Report BUY MAINTAIN BUY 3.20 UP 3.100



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