Ascendas REIT - DBS Research 2020-06-29: Catch It While You Can

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

Ascendas REIT - Catch It While You Can

  • Ascendas REIT - one of the cheapest large-cap industrial S-REITs with attractive pipeline for acquisitions.
  • Assistance to tenants to be limited to a manageable 2% of top line.
  • Attractive relative valuation vs other large-cap industrial S-REITs.
  • BUY maintained, Target Price S$3.45.



Assistance to tenants at < S$20m; c.2% of top line


Minimal impact from rent waivers.

  • Ascendas REIT (SGX:A17U), in response to questions raised by shareholders at its recent AGM, estimated that rent waivers provided to tenants amounted to less than S$20m. This is in addition to the property tax rebates and cash grants that the trust will fully pass on to eligible tenants.

Manageable exposure to SMEs.

  • SMEs make up < 20% of Ascendas REIT's Singapore portfolio by gross rental income. About 12% of these tenants are the F&B and retail SMEs while the remaining 88% are industrial SMEs. Among its exposures in Singapore, Australia, US and UK, none of the tenants has pre-terminated due to the COVID-19 outbreak.
  • While distributions are unlikely to be impacted in the near term, Ascendas REIT mentioned that it does not see the need to hold back dividends, for now.


Our thoughts:


A “COVID-19 resilient stock”.

  • In our view, a further shot of confidence is that the industrial segment is still seen as the subsector that will emerge the strongest post COVID-19. While assistance rendered to tenants is likely, the impact across the sector remains manageable at c.3-5% of revenues and we do not see significant downside risk to our earnings.
  • In fact, the future for the subsector remains bright, catalysed by possible acceleration of broad economic trends (i.e. adoption of e-commerce driving demand for warehouses, growth of new economy sectors, driving demand for high-specification premises and business parks in the longer term). These should drive demand for more higher-specification industrial properties in the longer term.

Cheapest large-cap REIT with attractive pipeline.






Derek TAN DBS Group Research | Dale LAI DBS Research | https://www.dbsvickers.com/ 2020-06-29
SGX Stock Analyst Report BUY MAINTAIN BUY 3.450 SAME 3.450



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