Singapore Stock Market News

Ascendas REIT - A decent hiding place

StockFanatic
Publish date: Thu, 27 Aug 2015, 11:01 PM
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We are upgrading AREIT to OUTPERFORM with a target price of S$2.59, implying total return of 24%. With the sell-off in equity markets, AREIT now trades at an FY16 yield of 6.9%.

AREIT has gone through the bulk of the conversions on its logistics assets to multi-tenanted buildings, while business park occupancies look to have bottomed with portfolio occupancy now at 88.8%.

AREIT extended its investment mandate to explore opportunities in mature markets, and plans to grow this to 20-30% of its portfolio. This is on the back of its sponsor winning the bid for GIC's ~S$1.1 bn logistics portfolio in Australia. The devil will be in the details for any potential deals, but further acquisitions could provide some support to DPU growth amid lacklustre organic growth.

With volatile markets we expect defensives to be in favour, while the decline in stock prices has improved the risk-reward for the sector, making the REITs a more conducive place to hide, at least in the rest of the year. We believe, Retail is the most benign (CMT and FCT), followed by Industrial (KDCREIT, MINT, AREIT)
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