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Ascendas REIT - OCBC Investment 2022-05-05: Solid Rental Reversions But Higher Utility Costs A Drag

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

Ascendas REIT - Solid Rental Reversions But Higher Utility Costs A Drag

  • Ascendas REIT reported 1Q22 positive rental reversions of 4.6%.
  • Portfolio occupancy slightly lower at 92.6%.
  • Aggregate leverage ratio increased to 36.8% with 79.1% of borrowings hedged.



Ascendas REIT reported 1Q22 positive rental reversions of 4.6% but occupancy was slightly lower

  • Ascendas REIT (SGX:A17U) provided a business update for 1Q22. No financial data was reported, but operationally, overall portfolio rental reversions came in healthy at 4.6% (4Q21: +2.9%). This was led by Australia (+16.5%), US (+14.0%) and Singapore (+3.9%). There were no lease renewals in UK/Europe.
  • Portfolio occupancy fared slightly worse, declining by 0.6 percentage points (ppt) q-o-q to 92.6%. Occupancy was flat for UK/Europe (96.7%) but declined in Singapore (-0.2 ppt to 90.0%), US (-0.5 ppt to 94.0%) and Australia (-2.4 ppt to 96.8% due to two logistics properties in Brisbane and Melbourne).
  • Regarding the topical issue of rising utility costs, we note that utilities contributed 23.8% of Ascendas REIT’s FY21 property operating expenses. However, Ascendas REIT’s share as the landlord accounted for ~8% of property operating expenses in FY21 as some costs can be recovered from tenants. It has currently locked in its electricity tariff rates until Jun 2022 and locked in its electricity tariff rates until Jun 2022 and expects an increase of ~50-70% for its portion of utility costs in FY22.
  • For its colocation data centres in Europe, Ascendas REIT procures renewable energy sources and its energy price is fixed with its vendor. We believe energy costs for non-vacant data halls can be passed through to tenants.

Reclassification of business segments shows Life Sciences accounting for 7% of AUM

  • Ascendas REIT reclassified its business operations into three key segments, namely Business Space, Logistics and Industrial and Data Centres. These accounted for 48%, 24% and 28% of its AUM of S$16.4b, as at 31 Mar 2022, respectively. Under its Business Space segment, Life Sciences was reported as a new sub-segment, and this formed 7% of Ascendas REIT’s overall AUM.
  • According to Ascendas REIT, Life Science properties are business spaces with lab-ready specifications. Although contribution is relatively small, we believe this will be one key area of focus for management going forward.


Ample room for acquisitions and redevelopment projects






OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-05-05
SGX Stock Analyst Report BUY MAINTAIN BUY 3.43 DOWN 3.840



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