Ascendas REIT

UOBKayhian on 22 Apr 2014

FY14 DPU (S cent): 14.2
FY15F DPU (S cent): 15.1
Results were in line with expectations although a slower take-up of upgraded space continued to weigh on performance. Ascendas REIT (A-REIT) reported 4QFY14 DPU of 3.55 cents (+0.3% yoy, +0.3% qoq) as the dilution from a private placement in 1Q13 was offset by higher distributable income (+0.2% yoy, +0.2% qoq) on lower interest expenses, higher revenue, and distribution of income and income support from Z-Link Beijing. Results were in-line with expectations, with FY14 DPU representing 99.6% of our full-year forecast.

Maintain BUY and target price of S$2.73, based on DDM (required rate of return: 6.9%, terminal growth: 1.8%). We trim our FY15-FY16 DPU estimates by 2-3% on higher operating expenses and on lower occupancy assumptions due to a slower take-up of vacant space and divestments. We also introduce our DPU estimate for FY16. Key risks include an economic downturn impacting rentals and slow take-up for vacant and upgraded space. Watch for further organic growth from filling the 10% vacancy in AREIT's portfolio, AEIs and the potential acquisition of Aperia as it approaches
completion.