Ascendas REIT - CGS-CIMB Research 2020-07-23: Stable Portfolio Occupancy


Ascendas REIT - Stable Portfolio Occupancy

  • Ascendas REIT's 1H20 DPU of 7.27 Scts makes up 48.3% of our FY20F forecast.
  • Portfolio occupancy remains stable, some drags from rent relief.
  • Downgrade to HOLD with a higher DDM-based Target Price of S$3.12.

Ascendas REIT's 1H20 results highlights

  • Ascendas REIT (SGX:A17U) posted a 14.6%/11.2% y-o-y rise in gross revenue and NPI to S$521.2m/S$388m with contributions from the US and Singapore business park properties, acquired in Dec 2019. This was partly offset by rent rebates to tenants and income vacuum from divestments/redevelopment properties.
  • Distribution income rose 3% y-o-y to S$263.2m, however, DPU declined 10.8% y-o-y to 7.27 Scts due to an expansion in unit base following a rights issue in Dec 2019.

Stable portfolio occupancy

  • Ascendas REIT achieved portfolio occupancy of 91.5% at end-1H20 on positive rental reversion of 5.4%. Australia and US portfolios recorded reversions of +16.2-16.6% while Singapore saw an average 4% across its properties. Sources of new demand came mainly from logistics and supply chain management, engineering, IT and data centres and lifestyle, retail and consumer products sectors.
  • Looking ahead, management indicated that it expects to achieve a low single-digit positive reversion in FY20, vs. its earlier guidance of flat reversion for the year.
  • Ascendas REIT has 8.2% of gross rental income to be renewed in 2HFY20F and another 15.8% in FY21F.

Some near-term drags from tenant rent reliefs

  • Ascendas REIT indicated that it expects to extend c.S$20m of out-of-pocket rent reliefs due to the impact of COVID-19, of which about half have been released to date, largely to tenants in Singapore.
  • In Australia, it has suspended rent collection from retail/F&B tenants ( < 1% of Australia income) from Apr until they reopen and have offered rental waiver and deferment to two SME tenants.
  • In UK, no rent rebates have been given to date although it allowed some tenants to change their rental payment structure.
  • The US remains robust with rental rebates provided to one small café operator.
  • Ascendas REIT completed the acquisition of a 25% stake in Galaxis in Mar 2020 and recently announced the purchase of a logistics property in Sydney for A$23.5m. The transaction is expected to be completed in 3QFY20 and will be fully funded by debt. Balance sheet is robust with aggregate leverage at 36.1% as at end-1H20.

Downgrade to HOLD

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-07-23
SGX Stock Analyst Report HOLD DOWNGRADE ADD 3.12 UP 3.000