Ascendas REIT

OCBC on 18 Apr 2012

Ascendas REIT (A-REIT) turned in a sturdy set of results as expected. 4QFY12 NPI rose by 13.2% YoY to S$95.1m, in line with our estimate of S$93.2m. DPU of 3.50 S cents is also consistent with our expectation of 3.24 S cents, and represents a 7.0% YoY growth despite an 11.2% increase in unit base. On its operational front, we note that the occupancy for multi-tenanted properties and portfolio remained robust at 92.8% and 96.4% respectively. Additionally, all segments of the portfolio registered positive rental reversions of 5.2-15.7% over the year. In the coming year, A-REIT expects to maintain a stable performance, with acquisitions and developments completed in FY12 to contribute positively to its income. Management also appears to be comfortable with the potential supply in industrial space over the next two years, but is more concerned with the impact of a broad-based slowdown in the economy and its accompanying volatility. However, the REIT noted that the threat of such a downturn is low, and that the enquiries and viewing of its properties are still healthy. We maintain our BUY rating and S$2.31 fair value on A-REIT.

Results in line with expectations
Ascendas REIT (A-REIT) turned in a sturdy set of results as expected. 4QFY12 NPI rose by 13.2% YoY to S$95.1m, while distributable income increased 27.2% to S$71.9m, due largely to the completion of development projects and acquisitions. This is in line with our NPI and earnings estimates of S$93.2m and S$68.5m, respectively. DPU of 3.50 S cents is also consistent with our expectation of 3.24 S cents, and represents a 7.0% YoY growth despite an 11.2% increase in unit base. For FY12, NPI and distributable income were up 8.5% and 14.2% to S$368.3m and S$277.8m, respectively. DPU, on the other hand, was up 2.5% to 13.56 S cents (6.7% yield).

Portfolio performance remains sound
On a same-store basis, we note that the occupancy for multi-tenanted properties and portfolio remained robust at 92.8% and 96.4% respectively (0.4ppt and 0.7ppt YoY improvement). The occupancy for investments completed in FY12 was lower at 76.6%, dragged down chiefly by FoodAxis @ Senoko which is currently 25.5% occupied. However, A-REIT is optimistic of its leasing prospects, with 35.6% of space under different stages of negotiation and another 11.6% receiving a list of enquiries. On its rental performance, we understand that all segments of the portfolio registered positive rental reversions of 5.2-15.7% over the year. Moreover, the passing rents for the area due for renewal in FY13 are currently 16-32% below the spot market rates, implying room for further positive renewal reversions.

Outlook still sanguine
In the coming year, A-REIT expects to maintain a stable performance, with acquisitions and developments completed in FY12 contributing positively to its income. Management also appears to be comfortable with the potential supply in industrial space over the next two years, but is more concerned with the impact of a broad-based slowdown in the economy and its accompanying volatility. However, A-REIT noted that the threat of such a downturn is low, and that the enquiries and viewing of its properties are still healthy. We maintain our BUY rating and S$2.31 fair value on A-REIT.