Ascendas Reit

Ascendas Reit | Add

Target price: S$2.89

July 31 close: S$2.75

CGS-CIMB, July 30

Ascendas Reit's (Areit) Q1 FY2019 revenue grew 1.5 per cent year-on-year due to the acquisition of three Australian properties, completion of 50 Kallang Ave and 20 Tuas Ave 1 redevelopment, 10 Woodlands Link, 13 International Business Park and 84 Genting Lane as well as positive rental reversion.

AReit announced a new asset enhancement initiative (AEI) for 138 Depot Rd in Q1 FY2019 worth S$3.9 million, bringing total AEIs to S$26.1 million. These three initiatives are slated for completion from H2 FY2019 onwards. The trust has also announced the acquisition of Ferntree Gully Drive in Melbourne and 1-7 Goss Drive in Brisbane for a total of A$47.2 million (S$47.71 million), and the divestment of 41 Changi South Ave 2 for S$13.6 million. In addition, it recently announced its maiden acquisition of 12 logistics properties in the UK for S$373.2 million or at an initial property yield of 5.32 per cent, with the trust looking to deepen its UK presence.

AReit's balance sheet remains robust with gearing of 35.7 per cent as at end Q1 FY2019; with 72.4 per cent of its borrowings on fixed rates. Average debt maturity is 3.4 years and weighted all-in cost of debt is at 2.9 per cent. This puts the trust in a good position to continue exploring more potential acquisition opportunities.

We continue to like AReit for its size and stability. A re-rating catalyst could come from more inorganic growth potential while slower-than-expected rental recovery is a key downside risk.

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