Ascendas Reit

Kim Eng on 16 Apr 2013

4Q-FY3/13 results inline. FY3/13 revenue at SGD575.8m, was 101% of ours and 103% of consensus estimate. 4QFY3/13 revenue at SGD145.4m (flat QoQ, +8% YoY), was 25% of ours and 26% of consensus estimate. FY3/13 DPU at 13.74 SG-cts (+1.3% YoY) was 97% of ours and 98% of consensus estimates. 4QFY3/13 DPU at 3.06 SG-cts (-15.5% QoQ, -12.6% YoY) was 22% of ours and consensus estimates. 4QDPU was brought down a SGD7m performance fee charge, payable to the REIT Manager, as the DPU growth in FY3/13 exceeds 2.5% (+3.6% YoY). Without this expense, FY3/13 and 4QDPU would have been 14.05 and 3.37 SG-cts respectively. Aggregate leverage inched down to 28.3% from 32.8% last quarter, following debt repayments and revaluation gains. All-in-financing costs for 4QFY3/13 averaged 3.32% (3Q: 3.19%) with an unchanged average term of debt of 3.9 years.

Stable portfolio continues to deliver. Occupancy rate (same-store basis) for the portfolio and multi-tenanted buildings (MTB) was slightly down at 95.2% and 91.5% respectively vis-à-vis 95.6% and 92.2% last quarter. We also noted that the gross revenue for hi-tech industrial was down 6% QoQ to SGD39.1m, partly due to the decline in average rents from SGD2.74 psf/mth to SGD2.63 psf/mth and the reduction of leasable area following AEIs. 4QFY3/13 weighted average lease to expiry was 3.7 years, with 21.4% of income due for renewal in FY3/14, comprising 6.0% of single-tenanted buildings tenancies and 15.4% of multi-tenanted buildings tenancies. A-REIT achieved 14% positive rental reversion in FY3/13, with a range of 6.1%-21.9% throughout all segments of the portfolio.

New Asset Development/Enhancement Initiatives. A-REIT announced the development of DBS Asia Hub Phase II, which is a 6-storey business park building next to the existing DBS Asia Hub, to be fully leased to DBS Bank Ltd upon completion. It will cost SGD21.8m and will increase GFA by 7,081 sqm. This will commence in 2Q13 and complete in 4Q14. AREIT will also be initiating enhancement work at Techpoint and the former Freight Links Building, at estimated costs of SGD7m each, to improve marketability. The AEI will complete by 1Q14 and 2Q14 respectively.

Moving up the value chain. Based on our estimates, A-REIT has 38% of its FY3/14F GAV in business/science parks and 23% in high-tech industrial/data centres. We expect these two segments to progressively increase in proportion as Singapore outsources its lower value-add activities to neighbouring countries (warehouse rents and asset values in Singapore are, respectively, 2.5x and 8.5x higher than in Iskandar Malaysia). Reiterate HOLD with a TP of SGD2.92.