• Results in line with expectations. Ascendas REIT’s proposed acquisition of UK logistics portfolio for S$373.15m is estimated to boost pro-forma FY18 DPU by 1.2%. We expect Ascendas REIT to make further acquisitions in the UK, as the market provides scalability.
• Back home, Singapore industrial rents continue to weaken albeit marginally. Management noted that there are some market expectations of a gradual recovery of the industrial property market, on the back of improving demand-supply dynamics.
• Maintain BUY with a lower target price of S$3.01.

Results

Results in line with expectations; maintain BUY with a lower target price of S$3.01, based on DDM (required rate of return: 6.7%, terminal growth: 2.0%). 1QFY19 DPU of 4.002 S cents was down 1.2% y-o-y, due to the absence of a one-off distribution. Excluding the one-off distribution, 1QFY19 DPU would have improved by 4% y-o-y.

Ascendas REIT’s 1QFY19 gross revenue and NPI grew by 1.5% and 3.8% respectively, due to higher contributions from newly-acquired properties, 100 Wickham Street and 108 Wickham Street in Brisbane, Australia, and a redeveloped property at 50 Kallang Avenue in Singapore. NPI was also higher, as a result of lower operating expenses (-4.2%yoy) from reduced property taxes, due to retrospective downward revisions in the annual value of certain properties. 

The results are in line with expectations, coming in at 24.4% of our full-year estimates.

Source: UOB Kay Hian Research - 31 Jul 2018