Excerpts from analysts' report

OCBC analysts: Andy Wong, CFA and Eli Lee

Kendall AREITThe Kendall is a six-storey multi-tenant building located within the Singapore Science Park II, which caters to Research & Development and related companies. Acquired in March 2015 for S$113.7 million, the property has a remaining land tenure of 64 years. The Kendall is the 19th property that A-REIT has acquired from its Sponsor since its IPO with eight properties in 2002. Photo: Company

ROBUST PERFORMANCE

  • 3QFY16 DPU jumped 9.9% YoY

  • Positive rental uplift of 7.3%

  • Occupancy boosted by Australia


3QFY16 results met our expectations

Ascendas REIT (A-REIT) reported a solid set of 3QFY16 results which came in within our expectations. Gross revenue grew 12.9% YoY to S$193.8m, underpinned by contributions from its acquisition of the Australian Portfolio and the Kendall, positive rental uplifts on lease renewals and higher occupancy at certain properties. DPU rose 9.9% YoY to 3.946 S cents.

On a 9MFY16 basis, A-REIT’s gross revenue increased 11.5% to S$556.9m and this formed 75.3% of our FY16 forecast; DPU of 11.947 Singapore cents represented an increase of 9.7%. Excluding a one-off S$6.5m distribution declared in 2QFY16, adjusted 9MFY16 DPU constituted 76.8% of our full-year projection.

Chia Nam ToonChia Nam Toon

CEO to retire on 31 Mar

Separately, A-REIT announced that its CEO Mr Tan Ser Ping would be retiring with effect from 31 Mar this year. Mr Chia Nam Toon, who is currently the CFO and Chief Corporate Officer of the Ascendas-Singbridge Group, will succeed Mr Tan. Mr Tan will take on the role of Advisor to the A-REIT Board for 12 months from his retirement to ensure a smooth transition.


Maintain BUY

A-REIT enjoyed a robust leasing cycle in 3QFY16, delivering a 7.3% increase for its renewal rates as compared to its previous contracted rates. This was broad-based across all its segments. Approximately 6.2% of A-REIT’s revenue is due for renewal for the remainder of FY16 and management expects moderate positive rental reversions.

For the full-year, A-REIT has kept its mid-single digit rental reversion guidance. Its portfolio occupancy inched up 0.2 ppt QoQ to 89.2%, and this was largely aided by its recently acquired Australian Portfolio (94.4%), while there was a decline in occupancy for its Singapore (-0.9 ppt QoQ to 88.9%) and China portfolio (-3 ppt QoQ to 67.6%).

We maintain our forecasts, BUY rating and S$2.50 fair value estimate on A-REIT. The stock is currently trading at an attractive FY16F P/B ratio of 1.04x and distribution yield of 7.0%.

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