• Ascendas REIT reported positive rental reversions and higher portfolio occupancy in 3Q21.
• Strong balance sheet with aggregate leverage at 37.4% at end-3Q21 provides room for inorganic growth.
• Reiterate ADD with an unchanged DDM-based target price.

Ascendas REIT's 3Q21 Business Update

• In its 3Q21 business update, Ascendas REIT (SGX:A17U) reported an improvement in portfolio occupancy to 91.7%, with higher take-up in Singapore, Australia and UK/Europe, partly offset by a slight drag in the US. Rental reversion averaged +3.7% in 3Q and +5.4% year-to-date.
• Ascendas REIT's aggregate leverage stood at 37.4% at end-3Q21, translating to an available debt headroom of S$4.2bn, based on a 50% limit, to pursue inorganic growth opportunities.
• Ascendas REIT has S$389.3m worth of asset enhancement initiatives currently underway in Singapore and Australia, scheduled to complete between 4Q21 and 4Q23.

Improving Operating Metrics in Singapore

• Singapore portfolio occupancy rose to retail tenants in Singapore affected by P2 Heightened Alert. No further details have been shared on the redevelopment of TUV SUD PSB Building in Singapore.

Long Lease Expiries and High Occupancy Overseas Provide Stability

• There were no lease renewals within the Australia portfolio in 3Q21 but occupancy and San Diego, USA and we anticipate the trust to continue achieving positive rental reversions going forward.

Reiterate ADD Rating on Ascendas REIT

• We leave our FY21-23F DPU to like Ascendas REIT for its diversified and resilient portfolio and strong inorganic growth visibility.

• Potential catalysts include faster-than-expected global recovery and accretive new acquisitions.
• Downside risks include a protracted economic ownturn.
• Refer to report attached below for Ascendas REIT's ESG metrics.

Source: CGS-CIMB Research - 19 Oct 2021