Ascendas REIT - Maybank Kim Eng 2020-10-27: Keeping The Faith

ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)

Ascendas REIT - Keeping The Faith

Ascendas REIT (SGX:A17U) delivered better occupancies in 3Q20, underpinned by demand for its Singapore business park and logistics properties. Rental reversions were weaker q-o-q, but remain in line with guidance, and set for growth in FY20.
We maintain our forecasts with drivers intact in this operational update.

Fundamentals remain strong, supported by scale, concentrated Singapore business parks portfolio, and DPU upside from further overseas diversification. Valuations are demanding at 5.4% FY21 yield. Maintain BUY.

Ascendas REIT's portfolio occupancy improved q-o-q from 91.5% to 91.9% as of end-Sep 2020, as better occupancies in Singapore (from 87.9% to 88.8%), mainly due its business park (Cintech II) and logistics asset (at 40 Penjuru Lane) which offset lower occupancies in Australia (98.4% to 97.5%) with a non-renewal at 92 Sandstone Place in Brisbane.
Government-related and logistics & supply chain management tenancies accounted for the largest 60.1% and 12.5% of new demand in 3Q20 by gross rental income.

Ascendas REIT's portfolio achieved a -2.3% rental reversion in 3Q20, vs +4.3% in 2Q20, as reversion was weaker in Singapore (at -2.8% from +4.0%), but stronger in the US (at +11.5% vs +16.2%). Its Singapore business & science parks performed better at +4.5% while the logistics & distribution centres reported a -16.2% reversion.
Management kept its guidance to achieve a low single-digit positive reversion for 2020.
We remain optimistic on its rental growth outlook, as its business parks remain under-rented and should deliver stronger (high single-digit) reversion into 4Q20.

Ascendas REIT announced the acquisitions of two properties under development in Australia:
1. a logistics warehouse (Lot 7 Kiora Crescent in Sydney) for SGD22.4m at 6.2% NPI yield; and
2. its fifth suburban office asset (MQX in Macquarie Park, Sydney) for SGD161.0m at 6.1% NPI yield, which should lift its Australian contribution to 15% of AUM.
In Singapore, Grab’s build-to-suit project and the iQuest@IBP redevelopment are set to be completed in 4Q21 and 1Q23, while the AEI at Aperia was pushed back to 4Q20. Its low 34.9% leverage and SGD4.2b debt headroom supports further deals.
See Ascendas REIT Share Price; Ascendas REIT Target Price; Ascendas REIT Analyst Reports; Ascendas REIT Dividend History; Ascendas REIT Announcements; Ascendas REIT Latest News.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-10-27

SGX Stock Analyst Report BUY MAINTAIN BUY 4.000 SAME 4.000