Ascendas REIT - Maybank Kim Eng 2019-12-02: Ready For Growth

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

Ascendas REIT - Ready For Growth


Adjusting estimates, top sector top pick, BUY

  • We fine-tune estimates following ASCENDAS REIT (SGX:A17U)'s recent EGM which saw unit-holders supporting its proposed acquisition of 28 US and two Singapore business park properties.
  • Ascendas REIT’s shares have retreated after its SGD1.31b, 15-for-100 rights issuance, even as growth fundamentals are looking up with 14%, 15%, and 15% respective boosts in revenue, NPI, and AUM. We see near-term catalysts from its Singapore recovery, rising overseas contributions, and further acquisition opportunities.
  • Valuations at 5.5% DPU yield and 4.0% CAGR are compelling for this largest most liquid industrial S-REIT name. Maintain BUY and SGD3.35 DDM-based Target Price (COE: 7.1%, LTG: 2.0%).



SG recovery to gain traction in 2020

  • We see Ascendas REIT’s rents rising further in 2020 as Singapore’s industrial sector recovery gains traction on easing supply-side pressures and with better visibility for business parks and high-specs. The addition of Nucleos and FM Global Centre at a 6.7% NPI yield should strengthen its business and science park market share as their contributions rise from 42% to 45% of its Singapore AUM.
  • We await details on its sponsor’s longer-term rejuvenation plans for the aging 30ha Science Park 1. We see higher plot ratios (now 1.2x) vs Mapletree Business City (2.8x) and one-north (4.6x) incentivising redevelopment as demand recovery picks up pace.


Higher DPU visibility on rising overseas contributions

  • Ascendas REIT's overseas NPI contribution should rise following the completion of its first US deal in Dec 2019 (see report: Ascendas REIT - Scaling Up Again). This is set to grow from 29% to 34% in FY22E.
  • AUM profile is more defensive from its overseas push since 2016, backed by a 29% addition in freehold logistics properties and suburban offices in Australia, the UK and US.
  • WALE has risen from 3.6 to 4.1 years while business and science park contributions rise from 33% to 42% of its total AUM, supported by demand from higher ‘growth sector’ tenancies (in financial, IT, and medical).


Strong balance sheet; DPU upside on further deals






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-12-02
SGX Stock Analyst Report BUY MAINTAIN BUY 3.350 SAME 3.350



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