20181004-辉立证券-Increasing_footprint_in_the_United_Kingdom_8页_712kb

Ascendas REIT (A-REIT) Summary

Core Content

Ascendas REIT (A-REIT) reported a highly active quarter in FY18/19, focusing on acquisitions and fundraising. The company completed several acquisitions in Australia and the UK, and executed a unit placement to raise capital for further development and expansion. The company also divested a property in Singapore, recognizing a gain.

Main Activities and Key Information

Acquisitions

• UK Portfolio 1: Acquired 12 logistics properties for £200mn (S$360.1mn) on Aug 16.

  • Gross internal area: 242,633 sq m
  • Land type: Freehold and 999-year leasehold
  • Funding: GBP-denominated loans
  • Initial NPI yield: 5.22%

• UK Portfolio 2: Proposed acquisition of 26 logistics properties for £257.5mn (S$459.2mn)

  • Gross internal area: 266,184 sq m
  • Land type: Freehold and 999-year leasehold
  • Funding: Proceeds from unit placement and GBP-denominated loans
  • Initial NPI yield: 5.39%

• Australia Portfolio 1: Acquired No. 1-7 Wayne Goss Drive in Brisbane for A$31.0mn (S$31.8mn) on Sept 7

  • Land type: Freehold
  • Initial NPI yield: 6.5%

• Australia Portfolio 2: Acquired Cargo Business Park in Brisbane for A$33.5mn (S$33.9mn) on Sept 17

  • Land type: Freehold
  • Initial NPI yield: 6.8%

Unit Placement

• Placement of 178,007,000 New Units at S$2.54 each, raising S$452.1mn
  • Purpose: Partially fund the second UK logistics portfolio (S$250mn), development in Singapore (S$109mn), debt repayment (S$87.1mn), and fees (S$3.9mn)
  • Advanced Distribution of 7.25 cents/unit for the period April 1 to Sept 17 will be paid to existing unitholders on Oct 17
  • Post-placement units in issue: 3,108,438,055

Divestiture

• Divested No. 41 Changi South Avenue 2 for S$13.6mn on Aug 20
  • Sale price 0.6% higher than original purchase price (S$13.5mn)
  • 17.0% higher than last valuation (S$11.6mn)
  • Recognized gain: S$2mn

Financial Highlights

• Total Return After Tax (FY19e): SGD 475mn
• Income Available for Distribution (FY19e): SGD 477mn
• DPU (FY19e): 15.72 cents/unit
• NAV (FY19e): SGD 213.6mn
• P/NAV (FY19e): 1.2x
• Gearing (FY19e): 35.4%
• Net Debt (FY19e): SGD 3,996mn

Valuation and Outlook

• Valuation Method: DDM (Cost of Equity: 6.9%; Terminal g: 15%)
• Target Price: SGD 2.82 (previously SGD 2.96)
• Implied P/NAV Multiple: 1.32x for FY18/19e
• Outlook: Stable
  • Post-acquisition WALE: 4.5 years
  • Tenancy risk profile: 8.8% of leases expiring in FY18/19
  • Rental reversions: Positive for Business & Science Parks and Hi-Spec Industrial/Data Centres
  • Logistics & Distribution Centres are the most exposed to renewal risk

Key Financial Metrics

Revenue and NPI Growth

Distribution Yield and P/E

Gearing and Net Debt

Major Shareholders

Portfolio Composition

• Singapore: 78%
• Australia: 14%
• UK: 8%

Risks and Considerations

• Foreign Currency Exposure: AUD and GBP have depreciated -5.3% and -1.4% respectively against SGD
• Debt Levels: Proposed second UK portfolio acquisition would result in 37.7% gearing, which exceeds the target capital structure of <40%
• Rental Guarantees: Both UK portfolios have rental guarantees on 5 assets to support effective occupancy
• Occupancy Rates: 92% for both UK portfolios; 91.6% for Singapore-Australia combined portfolio

Investment Recommendation

• Maintain Accumulate
• New Target Price: SGD 2.82
• Reason: Lower target price due to revised cost estimates

Contact Information

• Hong Kong Representatives:

  • Benny WANG - Dealing Director: (852)2277 6720, bennywang@phillip.com.hk
  • ZHANG Jing - Research Analyst (Transportation & Automobiles): (86) 2151699400-103, zhangjing@phillip.com.cn
  • Terry LI - Research Analyst (TMT, Education & Finance): (852) 2277 6527, terryli@phillip.com.hk
  • Eurus ZHOU - Research Analyst (Pharmaceutical & Consumer): (852) 22776515, euruszhou@phillip.com.hk
  • Tracy KU - Research Analyst (Retail & Property): (852) 2277 6516, tracyku@phillip.com.hk

• Sales Contacts:

  • Aric AU - Manager, Corporate & Institutional Sales: (852) 2277 6783, corporatesales@phillip.com.hk
  • Yoshikazu SHIKITA - Manager, International Sales: (852) 22776624, yshikita@phillip.com.hk

Disclaimer

• This report is for general circulation and not tailored investment advice
• Investors should seek financial advice before making any investment decisions
• The report is not a solicitation to act as a securities broker or dealer in any jurisdiction
• Redistribution or retransmission is prohibited without written consent from Phillip Securities (Hong Kong) Limited
• Investment involves risks; details available on Risk Disclosures Statement