Ascendas REIT (A-REIT) has raised gross proceeds of ~S$406.4m through a private placement. Management intends to use the bulk of the gross proceeds to fund the potential acquisition of a property within Singapore Science Park II and an integrated industrial mixed-use property at Kallang Avenue. We project the initial NPI yields for both assets to come in at around the 6%-handle, comparable to A-REIT’s implied portfolio yield. Aggregate leverage is expected to increase slightly from 32.8% as at 31 Dec 2012 to 34.6%, assuming that the potential acquisitions and committed investments are funded immediately after the placement. However, as the Kallang Avenue property is expected to obtain TOP only around mid-2014, we believe part of the proceeds may be used to repay debt pending its deployment. We now factor in the proposed acquisitions and placement into our forecasts. This raises our fair value from S$2.43 to S$2.60. However, as A-REIT appears to be fairly priced at current level, we maintain our HOLD rating.
Private placement of 160m new units
Ascendas REIT (A-REIT) has raised gross proceeds of ~S$406.4m through a private placement to institutional and other investors last Friday. The number of new units to be issued was up-sized from 140m units to 160m units (7.1% of total units outstanding) due to positive market demand. Issue price was fixed near the upper end of the indicative price range of S$2.50-S$2.55 at S$2.54 apiece. This represents a 35.1% premium to A-REIT’s NAV and a slight 4.2% discount to the last transacted price in its units. An advanced distribution of 2.70 S cents is expected to be paid on 25 Apr.
Proceeds to be used mostly for acquisitions
Management intends to use 31.0% (S$126.0m) of the gross proceeds to fund the potential acquisition of a property within Singapore Science Park II, another 66.4% (S$270.0m) to partially fund the potential acquisition of an integrated industrial mixed-use property at Kallang Avenue (currently under construction; value expected at ~S$490.0m), and the remaining amount for issue expenses and corporate/working capital purposes. We note that the upfront land premium introduced by JTC at the start of 2013 does not apply to both the Science Park II property (non JTC-leased site) and Kallang Avenue property (part of industrial government land sales). We project the initial NPI yields for both assets to come in at around the 6%-handle, comparable to A-REIT’s implied portfolio yield.
Maintain HOLD on valuation grounds
A-REIT anticipates its aggregate leverage to increase slightly from 32.8% as at 31 Dec 2012 to 34.6%, assuming that the potential acquisitions and committed investments are funded immediately after the placement. However, as the Kallang Avenue property is expected to obtain TOP only around mid-2014, we believe part of the proceeds may be used to repay debt pending its deployment. This is likely to improve its gearing to 30.3%, according to our estimates. We now factor in the proposed acquisitions and placement into our forecasts. This raises our fair value from S$2.43 to S$2.60. However, as A-REIT appears to be fairly priced, we maintain our HOLD rating.
Ascendas REIT (A-REIT) has raised gross proceeds of ~S$406.4m through a private placement to institutional and other investors last Friday. The number of new units to be issued was up-sized from 140m units to 160m units (7.1% of total units outstanding) due to positive market demand. Issue price was fixed near the upper end of the indicative price range of S$2.50-S$2.55 at S$2.54 apiece. This represents a 35.1% premium to A-REIT’s NAV and a slight 4.2% discount to the last transacted price in its units. An advanced distribution of 2.70 S cents is expected to be paid on 25 Apr.
Proceeds to be used mostly for acquisitions
Management intends to use 31.0% (S$126.0m) of the gross proceeds to fund the potential acquisition of a property within Singapore Science Park II, another 66.4% (S$270.0m) to partially fund the potential acquisition of an integrated industrial mixed-use property at Kallang Avenue (currently under construction; value expected at ~S$490.0m), and the remaining amount for issue expenses and corporate/working capital purposes. We note that the upfront land premium introduced by JTC at the start of 2013 does not apply to both the Science Park II property (non JTC-leased site) and Kallang Avenue property (part of industrial government land sales). We project the initial NPI yields for both assets to come in at around the 6%-handle, comparable to A-REIT’s implied portfolio yield.
Maintain HOLD on valuation grounds
A-REIT anticipates its aggregate leverage to increase slightly from 32.8% as at 31 Dec 2012 to 34.6%, assuming that the potential acquisitions and committed investments are funded immediately after the placement. However, as the Kallang Avenue property is expected to obtain TOP only around mid-2014, we believe part of the proceeds may be used to repay debt pending its deployment. This is likely to improve its gearing to 30.3%, according to our estimates. We now factor in the proposed acquisitions and placement into our forecasts. This raises our fair value from S$2.43 to S$2.60. However, as A-REIT appears to be fairly priced, we maintain our HOLD rating.
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