CGS-CIMB Research analysts Eing Kar Mei and Lock Mun Yee are positive on ESR-REIT’s recent announcement in relation to acquisitions and asset enhancement initiatives (AEIs), as well as a fundraising exercise.
The REIT is acquiring a modern ramp-up logistics facility in Singapore for a total cost of $124.7 million, representing an initial yield of 5.7% per annum. It also intends to carry out AEIs at two high-specification properties in Singapore at 16 Tai Seng Avenue and 7000 Ang Mo Kio Avenue 5 for $25.9 million and $53.3 million respectively.
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In addition, ESR-REIT announced its inaugural overseas acquisition in Australia - a 10% stake in the ESR Australia Logistics Partnership which holds 36 Australian assets for a total cost of $64.9 million including fees representing a post-tax dividend yield: 6.8%.
Eing and Lock expect the acquisitions in Singapore and Australia to be distribution per unit (DPU) accretive and could lift DPU by 0.4% and 2.9% respectively on a proforma basis.
In addition, they are bullish on the REIT’s expansion into Australia. “We believe this positions ESR-REIT to capture attractive opportunities in the Australian logistics market where we expect demand will remain strong, driven by infrastructure investments and ecommerce growth,” they say in a May 6 research note.
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On ESR-REIT’s fundraising exercise, which completed on May 7 and saw it raise $150 million through a private placement and preferential offering exercise, Eing and Lock note that the exercise could result in an all-in 1% DPU accretion and reduce EREIT’s gearing from 42.1% to 41.4%.
They have maintained their ‘add’ rating for the counter with an unchanged target price of 49.4 cents. "The REIT offers attractive FY2021 - 2023 dividend yields of 7% - 8%," they point out.
As at 4.54pm, units in ESR-REIT are up 1.5 cents or 3.85% higher at 40.5 cents.
