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Tuesday, October 27, 2020

Ascendas REIT Analysis @ 27 October 2020

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 198 properties across Singapore, U.S., Australia and England.

Quarter Performance Review

There is no financial statement released in this quarter due to the adoption of half-yearly reporting.
Rental reversion was -2.3% in 3Q 2020, but +4.2% for this year. The drag is from Singapore, especially from Logistics & Distribution Centres. However, business parks in Singapore and U.S. both are getting positive rental reversion.

AREIT has completed the acquisition of 254 Wellington Road and 2 AEIs in 3 Q 2020 which should slightly boost its revenue. This acquisition is only around 0.8% of AREIT property valuation. 

There are a few development, redevelopment and AEIs. In which 2 AEIs are expected to be completed by this year and 3 developments are expected to completed by 2021.

Lease Profile

Committed occupancy improved slightly to 91.9%. WADE is moderate at 3.9 years where the highest lease expiry of 21% falls in FY23. Weighted average land lease is slightly low at 52.59 years.

Debt Profile

Gearing ratio is healthy at 34.9%. Cost of debt and fixed rate debt % are moderate at 2.8% and 81.9% respectively. Unsecured debt % is high at 89.5%. Interest cover ratio is slightly high at 4.3 times. WADE is long at 3.7 years where the highest lease expiry of 18.3% falls in FY2024.

Diversification Profile

73.4% of income is from Singapore properties, where the remaining is from U.S., Australia and England. Top property, top tenant and top 10 tenants contributions are low at 4.6%, 4.1% and 17.6% respectively.

Key Financial Metrics

Property yield is slightly high at 5.9%. Management fee is competitive in which unitholders receive S$ 8.13 for every dollar paid to the manager. Distribution on capital is high at 4%. Distribution margin is moderate at 50.2%.


Slight Uptrend- NAV per Unit

Flat - Distribution Margin

Slight Downtrend - DPU, Property Yield

Downtrend - Interest Cover Ratio

Relative Valuation

i) Average Dividend Yield  - Average yield at 5.95%, apply the annualized DPU for the past 4 quarters of 14.369 cents will get S$ 2.41. 

ii) Average Price/NAV - Average value at 1.28, apply the latest NAV of S$ 2.169 will get S$ 2.78.

Author's Opinion

 Favorable Less Favorable
Diversified SectorHigh Top Geographical Contribution
Well Spread Lease ExpiryInterest Cover Ratio Downtrend
High Unsecured Debt % 
Long WADE 
Well Spread Debt Maturity 
Low Top Property Contribution 
Low Top Tenant & Top 10 Tenants Contribution 
Competitive Management Fees 
High Distribution on Capital

Overall, AREIT lease profile, debt profile and diversification profile remain healthy. Gearing has been reduced from 36.1% to 34.9% and occupancy improved slightly to 91.9% but with negative rental reversion. The recently completed acquisition of 254 Wellington Road has started its contribution in September, though it would not move the needle much. As for its income performance, we would have to wait for the next quarter to review. 

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

REIT Investing Community - Facebook Group where members share and discuss REIT topic

*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 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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