Ascendas REIT

OCBC on 18 Jul 2012

Ascendas REIT (A-REIT) delivered a commendable set of 1QFY13 results that came in line with our expectations. During the quarter, A-REIT signed new leases (including expansions) amounting to 46,314 sqm NLA (+16.7% YoY), reflecting continued demand for industrial space. For the rest of FY13, we note that A-REIT has 9.1% of its revenue due for renewal. Given that the current market rents are 16-35% higher than the average passing rents for the area due for renewal, we remain positive that A-REIT may continue to benefit from favourable rental reversions in the coming quarters. In our view, A-REIT looks set to deliver another year of robust growth, supported by full-year contribution from its recent investments. We maintain BUY on A-REIT, with a higher fair value of S$2.27 (S$2.22 previously) after tweaking our rental rate assumptions and completion dates for various projects in FY14 (FY13 forecasts unchanged).

Commendable set of 1QFY13 results
Ascendas REIT (A-REIT) turned in a commendable set of 1QFY13 results after market close yesterday. NPI came in at S$101.1m, up 13.9% YoY, while distributable income grew by 16.4% to S$75.5m. Expectedly, the strong performance was achieved mainly due to the completion of development projects and acquisitions made during the past year. While the number of units in issue rose by 7.3% QoQ following the private placement of 150m new units in May, DPU for the quarter increased by 10.3% YoY to 3.53 S cents. The results were in line with our expectations, with headline numbers forming 25.5% of our FY13 forecasts.

Operating metrics remained positive
A-REIT’s portfolio assets have remained strong despite the uncertainties in the global economy. Both the occupancy rates for the multi-tenanted buildings and overall portfolio improved to 90.1% and 94.6% respectively from 89.5% and 94.3% in 4QFY12. During the quarter, we note that A-REIT signed new leases (including expansions) amounting to 46,314 sqm NLA (+16.7% YoY), reflecting continued demand for industrial space. Notably, A-REIT continued to register positive rental reversions ranging from 10-21% throughout its asset types.

Retain BUY rating on A-REIT
For the rest of FY13, A-REIT has 9.1% of its revenue due for renewal. Given that the current market rents are 16-35% higher than the average passing rents for the area due for renewal, we remain positive that A-REIT may continue to benefit from favourable rental reversions in the coming quarters. In our view, A-REIT looks set to deliver another year of robust growth, supported by full-year contribution from its recent investments. We also note that the REIT will be undertaking a new S$6.0m asset enhancement project at Xilin Districentre, which will see its auxiliary office into warehouse space by 3QCY13. Maintain BUY with a higher fair value of S$2.27 (S$2.22 previously) after tweaking our rental rate assumptions and completion dates for various projects in FY14 (FY13 forecasts unchanged).