Ascendas REIT Review @ 18 August 2021

Basic Profile & Key Statistics

Ascendas REIT (AREIT) is a diversified REIT that invests in Business Park, Industrial, Logistics and Integrated Development Amenities and Retail (IDAR) properties. AREIT currently owns 211 properties across Singapore, U.S., Australia, England and Netherlands.

Performance Highlight

Gross revenue, NPI, distributable income and DPU increased YoY mainly due to the contributions from Europe/U.K. data centres (acquired in March 2021), Australian properties (acquired in Sep 2020 and Jan 2021) and U.S. properties (acquired in Nov 2020). 

2Q and 1Q rental reversion are at 8.9% and 3% respectively. Both are mainly contributed by U.S. properties. 

In 1H 2021, AREIT has completed the acquisition of business space in Australia, 11 data centres in Europe/U.K. and the remaining 75% interest in Galaxis. AEI for 21 Changi South Avenue 2, 100 & 108 Whickham Street has been completed in April. In 2Q, AREIT has divested 1314 Ferntree Gully Road and 11 Changi North Way above valuation.

AREIT has completed the development of Grab HQ and handed it over to the tenant on 30 July. Besides the divestment in 2Q, AREIT has also divested 82 Noosa Street and 62 Stradbroke Street in July.

There are 2 acquisitions under development in Australia which are expected to be completed by this year. The completion date for both redevelopments of UBIX and iQuest@IBP have been delayed to 1Q 2022 and 4Q 2023 respectively.

 Related Parties Shareholding

• REIT sponsor's shareholding is low at 17.98%
• REIT manager's shareholding is low at 0%
• Directors of REIT manager's shareholding is low at 0%

Lease Profile

• Occupancy is slightly low at 91.3%
• WALE is moderate at 4 years
• Highest lease expiry within 5 years is low at 21.2% which falls in 2022
• Weighted average land lease expiry is slightly short at 57.6 years

Debt Profile

• Gearing ratio is moderate at 37.6%
• Cost of debt is moderate at 2.4%
• Fixed rate debt % is moderate at 75.2%
• Unsecured debt % is high at 90.6%
• WADM is long at 3.7 years
• Highest debt maturity within 5 years is low at 14.2% which falls in 2025
• Interest coverage ratio is high at 4.6 times

Diversification Profile

• Top geographical contribution is high at 68.2% 
• Top property contribution is low at 3.9% 
• Top 5 properties contribution is low at 15.6% 
• Top tenant contribution is low at 3.7% 
• Top 10 tenants contribution is low at 19.7%
• Top 3 countries contribution is from Singapore, U.S. and Australia which contribute more than 90% of GRI

Key Financial Metrics

• Property yield is high at 5.7% 
• Management fees over distribution is low at 12.4% in which unitholders receive S$ 8.06 for every dollar paid 
• Distribution on capital is slightly high at 3.9%
• Distribution margin is moderate at 52.2%
• 0.8% (estimated) from past 12 months distribution is from income support.

Trends

• Slight Uptrend - NAV per Unit
• Slight Downtrend - DPU, Distribution Margin
• Downtrend - Interest Coverage Ratio, Property Yield, Distribution on Capital

Relative Valuation

• P/NAV - Average for 1y and 3y; Above average for 5y
• Dividend Yield - Average for 1y; Below average for 3y; Below -1SD for 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
Well Spread Lease Expiry	Low REIT Manager's Shareholding
High Unsecured Debt %	Low Directors of REIT Manager's Shareholding
Long WADM	High Geographical Contribution
Well Spread Debt Maturity	Interest Coverage Ratio Downtrend
High Interest Coverage Ratio	Property Yield Downtrend
Low Top Property & Top 5 Properties Contributions	Distribution on Capital Downtrend
Low Top Tenant & Top 10 Tenants Contributions
High Property Yield
Competitive Management Fees

AREIT performance has improved as compared to the previous half-year mainly due to contributions from recently acquired properties. The 2H performance is expected to improve from the full half-yearly contributions from Galaxis, 11 data centres in Europe/U.K. and 1-5 Thomas Holt Drive in Australia as well as the completion of Grab HQ.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.