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REITs investing & personal finance

Monday, August 10, 2020

Ascendas REIT Analysis @ 10 August 2020

Basic Profile & Key Statistics
Ascendas REIT (AREIT) invests in Office, Industrial and Logistics sectors properties. It is currently the largest SREIT in terms of market cap. 

Lease Profile
Occupancy is slightly low at 91.5%. WALE is short at 3.9 years, where highest lease expiry of 18.3% falls in FY22. Weighted average land lease expiry is slightly short at 52.84 years.

Debt Profile
Gearing is healthy at 36.1%. Cost of debt is moderate at 2.9% despite high unsecured debt at 89.5%. Fixed-rate debt is moderate at 80.9%. Interest cover ratio is high at 4.2. WADE is long at 3.6 years where the highest debt maturity of 18.5% falls in FY2024.

Diversification Profile
AREIT is not diversified in terms of Geographical as 78.5% of income is from Singapore properties. AREIT is diversified in terms of property and tenants where top property, top tenant and top 10 tenants contribute 4.7%, 4.2% and 18.1% respectively.

Key Financial Metrics
Property yield and distribution on capital are high at 6.1% and 4.2% respectively. Management fee is competitive in which unitholders receive S$8.26 for every dollar paid. Distribution margin is moderate at 50.7%. Income support is low at only 1.8%, this figure is estimated from latest annual report.

Related Parties Shareholding
Sponsor and directors of REIT manager (around 0.003%) holding a lesser stake than SREITs median level while REIT manager holing a higher stake than SREITs median level.

DPU and distribution for pre-rights issues and pre-COVID maintained more or less the same for past 5 years. NAV per unit is on a slight uptrend. 

Relative Valuation 
i) Average Dividend Yield  - Apply past 4 quarters DPU of 14.755 cents to average yield of 6.01% will get S$ 2.46.
ii) Average Price/NAV - Average value is at 1.26, apply the latest NAV of S$2.20 will get S$ 2.77.

Author's Opinion
Favorable Less Favorable
Diversified Sector Weighted Average Land Lease Expiry
Well Spread Lease Expiry Top Geographical Contribution
Unsecured Debt
Interest Cover Ratio
Well Spread Debt Maturity
Top Property Contribution
Top Tenant & Top 10 Tenants Contribution
Property Yield
Distribution on Capital
Management Fees
From the above table, there is a lot of favorable points for AREIT. Even after recent right issues and COVID, AREIT NAV per unit remains intact. However, its DPU potential (3% increase as per the proposed acquisition presentation) could not be realized due to COVID. However, AREIT share price has been increasing, faster than its NAV per unit and DPU growth.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as 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.

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