20180126-辉立证券-Operationally_stable_9页_1mb

Ascendas REIT 3Q18 Summary

Core Content

Ascendas REIT, a Singapore-based Real Estate Investment Trust (REIT), reported its 3Q18 results, highlighting a stable operational performance despite challenges in occupancy and market conditions. The report includes key financial metrics, acquisition and divestment activities, and a valuation analysis, with a focus on the REIT's growth strategy and investment outlook.

Main Points

Financial Performance

• Gross Revenue: Increased by 4.1% YoY to SGD 217 million.
• Net Property Income: Rose by 1.7% YoY to SGD 158 million, driven by lower property operating expenses (11.2% lower).
• Distributable Income: Slightly up by 1.1% YoY to SGD 116 million.
• DPU (Distributable Per Unit): Slightly decreased by 0.6% YoY to 3.970 cents.
• Distribution Yield: Maintained at 5.8%, with a stable yield outlook.

Portfolio Management

• Positive Renewal Rate: The Total Portfolio renewal rate was positive at 3.1%, primarily driven by Singapore's positive reversion (+5.8%), with Australia's negative renewal rate (-1.0%) offsetting the overall impact.
• Occupancy: Total portfolio occupancy slightly declined from 92.0% to 91.1% QoQ. Singapore's occupancy dropped from 90.1% to 88.8%, while Australia's occupancy remained stable at 98.5%.
• Acquisitions and Divestments:
  • Acquired 108 Wickham Street in Australia for A$30.0 million (SGD 30.8 million) in December 2017, expected to contribute ~SGD 7 million in NPI in its first year.
  • Divested 84 Genting Lane in Singapore in January 2018 for SGD 16.7 million, generating a capital gain of SGD 5.3 million.

Gearing and Debt Headroom

• Gearing: Remained low at 33.1%, with available debt headroom of ~SGD 800 million, allowing for potential portfolio growth of ~8%.

Outlook

• The outlook for Ascendas REIT is stable.
• Acquisitions have buffered the impact of lower occupancy.
• Expected minimal impact from the 5.1% of NLA up for renewal in 4Q FY17/18.
• The tapering new supply of industrial space in 2018 is expected to alleviate over-supply pressure.

Key Financials

Valuation Ratios

Investment Highlights

• Acquisition of 108 Wickham Street: A 6-storey office building in Brisbane, Australia, with 141 carpark lots, located close to key infrastructure and corporate areas.
• Divestment of 84 Genting Lane: A property in Singapore sold for SGD 16.7 million, generating a capital gain of SGD 5.3 million.

Outlook and Recommendations

• Outlook: Stable, with continued focus on portfolio growth and diversification.
• Target Price: Maintained at SGD 2.89, giving an implied FY18e forward P/NAV multiple of 1.36x.
• Recommendation: Accumulate, with a total return forecast of 10.9%.

Summary

Ascendas REIT demonstrated a stable performance in 3Q18, with gross revenue and distributable income in line with forecasts. The REIT maintained a low gearing ratio and had available debt headroom for potential growth. While occupancy dipped slightly in both Singapore and Australia, the positive renewal rate in Singapore offset the negative rate in Australia. The REIT also made strategic acquisitions and divestments, contributing to a diversified income stream and capital gains. The outlook remains stable, with the potential for continued growth and a moderate yield.