Simons Trading Research

Author: simonsg   |   Latest post: Tue, 13 Dec 2022, 10:52 AM


Ascendas REIT 2H21 - Scouting for Redevelopment Locally & Acquisitions Overseas

Author:   |    Publish date:

  • Ascendas REIT achieved positive rental reversion of 2.9% in 4Q21 driven by Singapore, the UK and US. Portfolio occupancy improved 1.5ppt q-o-q to 93.2% with broad-based advances from Singapore, Australia and the US. Management plans to scale up in Australia, the UK/Europe and the US through acquisitions.
  • Locally, Ascendas REIT sees opportunities to convert light industrial buildings into data centres.
  • Ascendas REIT provides resilient 2022 distribution yield of 5.9%. Maintain BUY.

Ascendas REIT (AREIT)'s 2H21 Results

  • Ascendas REIT (SGX:A17U) reported DPU of S$0.07598 for 2H21, in line with our expectations. It made a voluntary one-off waiver of its performance fees caused by rental rebates of S$18.5m recognised in 2020, which enhanced 2021 DPU by 0.2 cents.
  • Positive rental reversion driven by Singapore, the UK and US. Ascendas REIT achieved positive rental reversion of 2.9% in 4Q21 (1Q21: 3%, 2Q21: 8.9% and 4Q21: 3.7%). In Singapore, business space, light industrial & flatted factories and logistics & distribution centres provided healthy reversions of +2.2%, +3.5% and +3.1% respectively. New demand was derived mainly from the IT, biomedical, chemicals and engineering sectors. Business parks in the US registered strong reversions of +18.9% driven by San Diego and Raleigh. Data centres in the UK/Europe registered positive rental reversion of 6.2%. Management maintains guidance of positive low single-digit rental reversions for 2022.
  • Broad-based improvement in occupancies. Ascendas REIT's portfolio occupancy improved by 1.5ppt q-o-q to 93.2% in 4Q21.
    • In Singapore, occupancy improved by 1.7ppt q-o-q to 90.2% due to higher occupancy at Xilin Districentre (improved from 68.6% to 100%) and Nucleos (improved from 80.9% to 98.4%). Curtin University has relocated to be the anchor tenant at The Alpha at Science Park 2 (improved from 47.1% to 74%).
    • In Australia, occupancy improved 1.7ppt q-o-q to 99.2%. Occupancy for the US improved 3.1ppt q-o-q to 94.5% as occupancy for the 11 last-mile logistics properties in Kansas City improved from 92.6% to 100% shortly after the completion of the acquisition in Nov 21.

Asset Recycling Sharpens Focus on the New Economy Sectors

  • Ascendas REIT deployed S$1,930.8m for healthy at 3.5 years. 79.4% of its borrowings are hedged to fixed rates. Ascendas REIT has debt headroom of S$4.8b based on regulatory limit on aggregate leverage of 50%.

Plotting Steady Growth

  • Ascendas REIT's management targets acquisitions worth S$1b in 2022 primarily by 5.0% post-transaction costs. The acquisition is estimated to improve pro forma 2020 DPU by 0.11 cents, representing accretion of 0.7%.

Maintain BUY Call on Ascendas REIT

  • We maintain our 2022 DPU forecast for Ascendas REIT at DDM (cost of equity: 6.0%, terminal growth: 1.8%).
  • Catalysts:
    • Resiliency and growth from the business parks, logistics and data centre segments.
    • Contributions from development projects and asset enhancement initiatives.

Source: UOB Kay Hian Research - 9 Feb 2022

Share this

Related Stocks

Chart Stock Name Last Change Volume 
CapLand Ascendas REIT 2.82 +0.04 (1.44%) 9,949,700 

  Be the first to like this.

I3 Messenger
Individual or Group chat with anyone on I3investor

255  189  232  692 

Top 10 Active Counters
 Sembcorp Marine 0.11+0.003 
 HSI 20600MBeC.. 0.066+0.013 
 HSI 21000MBeC.. 0.08+0.014 
 HSI 18400MBeP.. 0.056-0.016 
 HSI 21800MBeC.. 0.055+0.01 
 HSI 18200MBeP.. 0.083-0.016 
 Genting Sing 1.10+0.03 
 HSI 21400MBeC.. 0.032+0.008 
 HSI 17400MBeP.. 0.058-0.013 
 HSI 22200MBeC.. 0.062+0.011