Analysts from Maybank Kim Eng, CGS-CIMB Research, OCBC Investment Research and UOB Kay Hian Research are mostly upbeat on Ascendas REIT’s (A-REIT) 1QFY2021 ended March business update, which came out on April 23.
Maybank Kim Eng analyst Chua Su Tye kept his ‘buy’ call for A-REIT with a higher target price of $3.65 from $3.60 previously.
CGS-CIMB’s Lock Mun Yee retained her ‘add’ call with an unchanged target price of $3.30. The research team at OCBC and UOB Kay Hian's Jonathan Koh also kept their ‘buy’ calls with an unchanged fair value of $3.84 and $3.82 respectively.
SEE:Ascendas REIT reports dip in portfolio occupancy to 90.6% in 1Q21 business update
Chua says A-REIT remains his top pick for the sector, noting that rental recovery is still underway in 2021, despite portfolio occupancy falling to 90.6% q-o-q from 91.7% previously.
“A-REIT achieved stronger portfolio rental reversions in 1QFY2021 of +3.0%, led by its Singapore business & science parks (+2.8%), and logistics & distribution centres (+5.6%),” he points out.
He also notes that A-REIT’s assets under management jumped 18% q-o-q to $5.1 billion following the $904.6 million acquisition of 11 data centres in Europe, which completed on March 17.
His higher target price of $3.65 reflects raised distribution per unit (DPU) estimates by 1.3% for the added European data centre portfolio.
CGS-CIMB’s Lock is similarly positive on the rental reversions and notes it is expected to remain positive through the rest of FY2021.
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Lock also views that while the dip in occupancy was mainly driven by A-REIT’s Singapore portfolio which fell to 86.9% due to non-renewals, occupancy at overseas properties remains high at 94.9% for its Australia portfolio and 92.5% for its US portfolio.
She expects earnings enhancement from the European data centres to provide long-term income visibility for A-REIT, with a weighted average lease expiry (WALE) of 4.6 years.
UOB Kay Hian's Koh is similarly positive on the new data centres, which he notes have "injected a new dimension for growth" for A-REIT.
He also believes that more acquisitions are forthcoming in 2021, and anticipates the REIT to potentially refocus on expanding in Singapore for the year.
Meanwhile, the research team at OCBC was the least bullish on the REIT, stating that its 1QFY2021 business showed ‘mixed operational performance’ given the lower portfolio occupancy.
The team also notes that A-REIT’s aggregate leverage ratio increasing from 32.8% (as at Dec 31, 2020) to 38% after the acquisition of the data centres in Europe. However, weighted average all-in debt cost fell by 50 basis points q-o-q to 2.2% which the team believes was likely due to the lower funding costs for the European acquisition.
As at 4.45pm, units in A-REIT are 2 cents or 0.64% higher at $3.13.
