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Simons Trading Research

Author: simonsg   |   Latest post: Wed, 18 May 2022, 11:34 AM

 

Ascendas REIT - Recovery on Track

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Still Our Top Pick

  • Ascendas REIT (SGX:A17U) achieved stronger portfolio rental reversions in 1Q21 of +3.0%, led by its Singapore business & science parks (+2.8%), and logistics & distribution centres (+5.6%). While its portfolio occupancy fell due to non-renewals, rental recovery in 2021 remains underway. We raised DPU forecast by 1.3% with the added European data centre portfolio.
  • Ascendas REIT's fundamentals are strong, backed by scale, rising DPU visibility, upside from deals and/or redevelopments, and further overseas diversification.
  • Valuations are demanding at 5.1% FY21 yield. Maintain BUY, with higher DDM-based S$3.65 target price (COE: 6.4%, LTG: 2.0%).

Lower Occupancies, Dips in Singapore, Australia

  • Ascendas REIT's portfolio occupancy fell q-o-q to 90.6% (from 91.7%), due mainly to weaker occupancies in Singapore (from 99.4% to 86.9%) and Australia (97.4% to 94.9%), with non-renewals at TUV SUD PSB Building and 138 Depot Road (in Singapore) and 1 Distribution Place (Sydney) and 62 Stradbroke Street (Brisbane).
  • Tenants from the biomedical, electronics, and distributor trade segments accounted for the highest proportion of new demand in 1Q21 by gross rental income at ~34%, 29% and 10% respectively.

Rental Reversion Stronger at +3.0%

  • Ascendas REIT's portfolio delivered a distribution centres at +5.6% (from - 7.1%), while rental reversions maintain an optimistic outlook for Ascendas REIT's rental growth, which we believe will likely be led by its business parks, suburban office and logistics space (now 79% of its AUM).

AUM Boost From European Expansion

  • Ascendas REIT's AUM jumped its leverage rose to 38.0% (from 32.8%).
  • Ascendas REIT's deal pipeline includes S$251.2m in Australia over the next two years, which suggests a further S$3.6b debt headroom (at 50% limit). We believe Ascendas REIT could revisit its sponsor’s S$1b pipeline at Singapore’s Science Park in the medium term.

Source: Maybank Kim Eng Research - 25 Apr 2021

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Chart Stock Name Last Change Volume 
Ascendas Reit 2.70 -0.03 (1.10%) 13,354,600 

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