Towards Financial Freedom
Ascendas REIT - Bullish Due To Positive Signs
Ascendas REIT (Areit) posted a DPU of 3.55 cents (+0.6% y-o-y) in 1QFY14, in line with our estimate (+0.2% deviation). Revenue and NPI came in at SGD150.9m (+6.3% y-o-y) and SGD108.0m (+6.8% y-o-y) respectively. The higher revenue was mainly attributed to new contributions from The Galen and positive rental reversions on renewals. Maintain BUY, with a slightly higher TP of SGD2.48.
- In line. Areit's 1QFY14 results were largely in line with our forecasts, with a positive rental reversion averaging about 9.6% across all segments of its portfolio. The occupancy rates for both its portfolio and multi-tenanted buildings shifted to 94.3% and 92.0% vs 94.9% and 90.4% respectively from a year ago. This was a result of the completion of several asset enhancement initiatives over the year, which resulted in an increase in total available net lettable area.
- Active capital management. In 1QFY14, management continued to identify yield-accretive investment opportunities and among the activities proposed, three new asset enhancement works were scheduled. These projects, at Techquest, LogisTech and Corporation Place, amounted to SGD25.4m and slated for completion by 3Q14. Meanwhile, the REIT had earlier this month completed the acquisition of a business park property in Shanghai that has a guaranteed yield of 10.8%, while the divestment of 6 Pioneer Walk was completed back in June with a gain of SGD7.2m.
- Healthy gearing and resilient against rising interest rate. In 1QFY14, the Group's aggregate leverage crept up marginally to 28.6% (+0.3% qo- q). Going forward, post full funding of its committed investments, Areit's gearing is expected to stabilise at a healthy 30.5%. This allows the trust to have ample debt headroom of SGD1.9bn (translating to a 45% gearing) for future investment purposes. As 68.1% of its total debt is tied to a fixed interest rate for an average term of four years, every 50bps increase in the interest rate will result in a change of a mere 0.13 cent, or c.1.0%, in distributable income.
- Maintain BUY, with TP slightly revised to SGD2.48. As the outlook for its earnings and portfolio occupancy rates remain stable and given that its share price has recently undergone a correction, we continue to see value in Areit. Maintain BUY with a slightly higher DDM-based (COE: 8.0%, TGR: 1.0%) TP of SGD2.48.
Source: OSK
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