ESR-REIT (SGX:J91U)
ESR-REIT - A Better Quarter
- Absence of rental rebates in 1Q21 on improving operating environment.
- Rental collections back to pre-pandemic levels.
- AEI at UE BizHub East was completed.
ESR-REIT's 1Q21 core DPU rose 14.8% y-o-y
- ESR-REIT (SGX:J91U) reported its 1Q21 business update. 1Q21 revenue and net property income rose 4.4% y-o-y and 7.6% y-o-y to S$60.3m and S$44.1m respectively, mainly attributable to the absence of provision for COVID-19 rental rebates and lower property expenses. As such, ESR-REIT's 1Q21 core DPU grew 14.8% y-o-y and 8.0% q-o-q to 0.800 cents, at 27% of our initial full-year forecast which we consider to be broadly in-line with our expectations.
Improving leasing momentum
- ESR-REIT's portfolio occupancy remained stable at 90.8% (-0.2 ppt q-o-q) which was above JTC’s average of 89.9%. ESR-REIT saw strong rental collection of 97.5% in 1Q21, in-line with pre-COVID-19 levels. Rental reversions came in at -5% in 1Q21, largely due to renewals of certain large tenants in the business park segment.
- We expect rental reversions to range from slightly negative to flat for FY21, given the still soft economy and large pipeline supply across the various industrial space in 2021 and 2022 due to delay in completions of projects in 2020 caused by COVID-19.
- Leasing momentum, however, improved in 1Q21. Out of ESR-REIT’s 16.9% of expiring leases by rental income in FY21, 28.1% have been renewed ahead of expiry. Management also received more leasing interests from technology, media, e-commerce and pharmaceutical sectors, and observed new leasing demand from glove manufacturing and AgriTech companies.
Ongoing AEIs to drive growth
- The rejuvenation works at UE BizHub East had been completed in March and was rebranded as ESR BizPark@Changi. AEI at 19 Tai Seng Avenue is expected to complete in 3Q21.
- Looking ahead, ESR-REIT is likely to carry out another 2-3 AEIs which could be funded by the proceeds of S$50m from the divestment of non-core assets. We increase our risk-free rate assumption from 1.55% to 1.9%. Correspondingly, our fair value estimate for ESR-REIT decreases from S$0.47 to S$0.45.
- See ESR-REIT Share Price; ESR-REIT Target Price; ESR-REIT Analyst Reports; ESR-REIT Dividend History; ESR-REIT Announcements; ESR-REIT Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2021-04-23
SGX Stock
Analyst Report
0.45
DOWN
0.470
