Ascendas REIT (A-REIT) announced that it has entered into a Sale and Purchase agreement with two indirect wholly-owned subsidiaries of China Vanke for the divestment of its A-REIT City@Jinqiao business park property in Shanghai for an attributable property value of S$221.6m (~RMB1.1b). This is A-REIT’s last remaining property in China following the divestment its two other China properties this year. The attributable property value of S$221.6m is approximately 1.8x of the original property value of S$122.3m when it was acquired in 2013, and is also 8.6% above the property’s book value of S$204.0m, as at 31 Mar 2016.

If A-REIT were to use the net proceeds to pare down its debt, its aggregate leverage will be lowered by 1.4 ppt. Given its proposed divestment of its last property in China, we now expect A-REIT to focus on expanding its footprint in Singapore and Australia.

Maintain BUY and S$2.67 fair value on the stock.

Source: OCBC Research - 28 Oct 2016