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.
- While Ascendas REIT's share price remains strong, it has been lagging behind its larger-cap industrial peers. On a relative basis, Ascendas REIT is trading at a forward prospective yield of c.5% and P/NAV of 1.4x.
- See Ascendas REIT Share Price; Ascendas REIT Target Price; Ascendas REIT Analyst Reports; Ascendas REIT Dividend History; Ascendas REIT Announcements; Ascendas REIT Latest News.
- With an attractive pipeline of stabilised properties (mainly high-quality business parks in Singapore) for acquisition from Sponsor, CapitaLand (SGX:C31), we believe that the market has not accorded the right premium for the largest-cap REIT in Singapore which remains in the virtuous cycle of accretive growth.
Derek TAN
DBS Group Research
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Dale LAI
DBS Research
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https://www.dbsvickers.com/
2020-06-29
SGX Stock
Analyst Report
3.450
SAME
3.450
