Thursday, July 18, 2013

Ascendas REIT: Apparent growth drivers (OCBC)

Ascendas REIT:
Fair value S$2.45
add: 12m dividend forecast S$0.140
versus: Current price S$2.24

Apparent growth drivers
• 11.3% rise in distribution amount
• 9.6% increase in renewal rents
• Embarking on new enhancement projects

Ascendas REIT (A-REIT) reported NPI of S$108.0m and amount available for distribution of S$85.2m, up 6.8% and 11.3% YoY respectively. The increase was driven mainly by contribution from its newly-acquired The Galen and positive rental reversions. On the operational front, A-REIT continued to deliver as well. Despite starting FY14 with 21.4% of its revenue due for renewal, A-REIT has managed to reduce the figure significantly to 14.8%, thanks to its proactive portfolio management. Moreover, positive rental reversions averaging 9.6% were achieved across all its property segments.
During the quarter, A-REIT also announced three new asset enhancement works to optimize its yield. In addition, we understand that A-REIT has completed the purchase of its second property in China in Jul, and is actively working to fill the spaces. These efforts, together with continued higher renewal rents and vacancies at its existing portfolio, are likely to provide further upside in its NPI. We are keeping our FY14 forecasts unchanged as the 1Q performance was within view. Maintain BUY and S$2.45 fair value on A-REIT.

Consistent set of interim results
Ascendas REIT (A-REIT) released its 1QFY14 scorecard last evening. NPI grew by 6.8% YoY to S$108.0m, while amount available for distribution rose by 11.3% to S$85.2m. The increase was driven mainly by contribution from its newly-acquired The Galen and positive rental reversions. DPU saw a marginal growth of 0.6% YoY to 3.55 S cents. However, this came as no surprise to us as the units outstanding increased 7.3% due to the private placement in Mar. We deem the results as being within expectations, given that 1Q DPU formed 25.0/25.3% of consensus/our full-year DPU forecasts.

Operationally healthy
On the operational front, A-REIT continued to deliver promising results. Despite starting FY14 with 21.4% of its revenue due for renewal, A-REIT has managed to reduce the figure significantly to 14.8%, thanks to its proactive portfolio management. Moreover, positive rental reversions averaging 9.6% were achieved across all its property segments. While overall occupancy rate dipped slightly by 40bps QoQ to 93.6%, we note that it was largely due to conversion of certain single-tenanted buildings to multi-tenanted, and not softening of the economic environment.

Relentless search for accretive investments
During the quarter, A-REIT announced three new asset enhancement works to be undertaken at Techquest, LogisTech and Corporation Place to optimize its yield. Including A-REIT’s previous committed investments, total additional funding of S$190.8m is expected. This would bring its current aggregate leverage of 28.6% up to 30.5% – still very strong in our view. We also understand that A-REIT has completed the purchase of its second property in China called A-REIT City@Jinqiao in Jul, and is actively working to fill the spaces. We believe these efforts, together with continued higher renewal rents and vacancies at its existing portfolio, will provide further upside in its NPI.

Maintain BUY
We are keeping our FY14 forecasts unchanged as the 1Q performance was within view. Maintain BUY and S$2.45 fair value on A-REIT.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 17/07/13

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