STI : 3,067.57
Price Target: 12-Month S$2.44 (Prev S$2.37)
Steady earnings growth stream over coming two years
Investment in Aperia to bear fruit from 2H14
BUY maintained, TP raised to S$2.44
Steady earnings growth. Ascendas REIT is expected to deliver steady earnings growth of close to 3% over FY14-15F. This is expected to be driven by a combination of organic rental growth (32.9% of income expiring in the coming two years), of which expiring rents are 11-41% below current market levels. In addition, the REIT continues to upgrade its portfolio through strategic asset enhancements worth about S$136m, estimated to be completed progressively over the coming quarters.
Investment in integrated property development in Kallang or “Aperia” to bear fruit soon. A-REIT invested in convertible bonds in PLC 8, an integrated property development in Kallang Avenue (est. NLA of 650,000 sqft with 15% of its being retail space), which is estimated to have a gross development value of S$490m. The property is expected to achieve TOP status in middle of 2014, after which A-REIT has the option to convert to equity. Upon completion and full leasing, assuming a 6% ROI, Aperia is expected to contribute significantly to the growth profile of the trust.
BUY maintained, TP S$2.44. Our earnings estimates are adjusted slightly as we update our reversionary assumptions and include the contribution of Aperia from 2H14 onwards. Our BUY Call is maintained, TP raised to S$2.44.
Publish date: 19/12/13