SINGAPORE (June 9): Maybank Kim Eng is maintaining its “buy” call on Ascendas REIT, saying the latter commands the best asset mix among the industrial S-REITs.
Maybank also expects NPI contributions from its business parks and hi-specification properties – at 59% of AUM – to outpace its portfolio growth, given these properties’ stronger supply-demand visibility.
Meanwhile, asset-conversion pressures have weakened substantially, with just 0.8-1.8% of leases expiring in Singapore till FY19, due to single-tenanted buildings (STBs).
This should support both occupancy and NPI margin improvements, says analyst Chua Su Tye in a Friday note.
“We see continued acquisitions from its sponsor’s pipeline of more than $1 billion of business and science parks in Singapore following the $420 million Science Park Drive deal completed in Feb 2017,” says analyst Chua Su Tye in a Friday note.
In FY17, AREIT divested its China assets to scale up its Australian core, now at 13% of its AUM. AREIT’s balance sheet also remains strong with an aggregate leverage at 33.8%. This is below its 10-year average and that of peers.
“We estimate $1.1 billion/$2.1 billion of debt headroom before it reaches the 40%/45% regulatory thresholds,” says Chua.
Maybank is lifting DPU forecasts by 0-2% through FY20E for higher margin assumptions. Even after a 21% YTD rally, valuations remain undemanding against its 14-year average.
Units of Ascendas REIT are trading 3 cents higher at $2.70.
