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
- Ascendas REIT’s fundamentals are well supported by its scale, concentrated Singapore business parks/high-specs portfolio, and DPU upside from its overseas diversification.
- We remain positive on S-REITs (see report: Singapore REITs - Maybank Kim Eng 2019-04-03: Patience Rewarded) as we expect rates to stay lower for longer against the current rate hike cycle; Ascendas REIT is best placed as the sector’s largest, most liquid proxy.
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2019-04-30
SGX Stock
Analyst Report
3.20
UP
3.100
