SINGAPORE (April 18): Maybank Kim Eng is starting coverage of Ascendas REIT with a “buy” call and $2.85 target price given that its portfolio geared towards the Singapore government’s pro-growth efforts.
In a Tuesday report, analyst Chua Su Tye says AREIT offers prominent exposure to Singapore’s business parks and high-specs factories which are geared towards the government’s push for higher value-add businesses.
This is further entrenched by its recent $420 million acquisition of the Science Park Drive properties, with WALE extension from 3.7 years to 4.4 years and strong tenant quality enhancing cashflow visibility.
AREIT has immediately scaled up in Australia with its acquisition of 26 logistics assets in Sept 2015, its most aggressive overseas expansion.
The properties, on freehold land tenures with fixed annual rent escalations, help drive earnings visibility and play to the strengths of AREIT’s risk profile.
“Looking ahead, we see further momentum in this inorganic growth lever, with management guiding for overseas assets to comprise 20-30% of its portfolio, from 14% currently,” says Chua.
AREIT has strengthened its balance sheet on the back of proactive portfolio reorganisation initiatives including divestment of its final China asset and ESC conversion.
With a gearing of 31.8%, average debt maturity of 3.9 years, and estimated $2.3 billion in debit capacity, Chua expects management will endeavour to recycle capital into higher-yielding and newer assets.
AREIT is also the top pick of RHB analyst Vijay Natarajan who was quoted in “Industrial property REITs rallying” by Goola Warden in this week’s The Edge Singapore (Issue 775, April 17)
Locally-listed industrial property real estate investment trusts have been rallying strongly, amid talk of mergers and acquisitions, and surprisingly supportive economic data. And, some analysts see them going higher.
Natarajan says AREIT which is the largest owner of business parks among the locally listed REITs and business parks are a particularly favourable segment of the industrial property market, benefiting from steady demand and no new supply coming in until 2019.
“Among the big-cap industrial REITs, we prefer Ascendas REIT for its well-diversified portfolio, strong parent and favourable exposure to the science park and business park segments,” said Natarajan in a recent report.
Units of AREIT are up 1 cent at $2.53.
