Thursday, July 18, 2013

A-REIT: All The Positive Signs Aligned (OSK)

AREIT: All The Positive Signs Aligned
(BUY, SGD2.26, TP: SGD2.48)

AREIT announced its 1QFY14 results recently, posting DPU of 3.55S¢ (+0.6% y-o-y); 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-oy) respectively. The increase in revenue was mainly attributed to new contributions from The Galen and positive rental reversions on renewal. Maintain BUY on AREIT with a slightly higher TP of SGD2.48.

1QFY14 results in line with expectations. 1QFY14 results were largely in line with our forecast, with a positive rental reversion averaging about 9.6% across all segments of portfolio. The occupancy rates for both its portfolio and multi-tenanted buildings (MTB) 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 by AREIT. During 1QFY14, management continues to identify yield-accretive investment opportunities. Among the activities proposed, three new asset enhancement works were scheduled. These projects at Techquest, LogisTech and Corporation Place amounted to a total SGD25.4m and are expected to be completed by 3Q14.

Concurrently, the acquisition at Shanghai was completed with a guaranteed yield of 10.8% in July13, while the divestment of 6 Pioneer Walk was completed in June13 with a gain of SGD7.2m.

Healthy gearing while remaining defensive against rising interest rate. During 1QFY14, aggregate leverage crept up marginally to 28.6% (+0.3% q-o-q). Going forward, after the full funding of the committed investments, gearing is expected to stabilise at a healthy level of 30.5%; giving the REIT ample debt headroom of SGD1.9bn (translating to 45% gearing) for future investment purposes. With 68.1% of total debt under fixed interest rate for an average term of four years, it was indicated that for every 50bps increase in interest rate will result in only 0.13S¢ (or c.1.0% change in distributable income).

Maintain BUY with a slightly revised TP to SGD2.48. With a stable outlook for AREIT’s earnings and portfolio occupancy rates, coupled with the recent correction in share price, we continue to see value in AREIT and maintain BUY with a slightly higher DDM based (COE: 8.0%, TGR: 1.0%) TP of SGD2.48.

Source/Extract/Excerpts/来源/转贴/摘录: OSKResearch,
Publish date: 17/07/13

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