Maybank Kim Eng reiterates ‘Buy’ on Ascendas REIT given potential acquisitions

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Maybank Kim Eng has reiterated a ‘Buy’ call on Ascendas REIT, and upgraded its target price on the Singapore-listed industrial landlord.

In a recent report on the counter, Maybank Kim Eng described Ascendas REIT as its top industrial pick with the best exposure to a sector that it now seen to be in recovery mode.

“An expected tapering off of new supply in 2017 is expected to benefit its well-entrenched business parks and hi-spec industrial properties”, said Maybank Kim Eng in its report, noting that about 59% of Ascendas REIT’s assets fall under these two categories.

The brokerage firm also pointed to Ascendas REIT’s sponsor’s SGD1 billion (USD700 million) pipeline of properties, which can be potentially acquired in the near to medium term.

This potential has increased lately given Ascendas REIT’s recent divestment of its China properties, and scaling up on Australian assets, which now comprise 13% of its AUM.

The REIT’s balance sheet also remains strong, opined Maybank Kim Eng, given its aggregate leverage of 33.8%, which is below the ten-year average, and that of similar industrial REITs listed in Singapore.

As such the brokerage estimates a further SGD1.2 billion – SGD2.1 billion of debt headroom before it reaches the 40% and 45% regulatory thresholds.

Given these factors, Maybank Kim Eng has raised its target price on Ascendas REIT from SGD2.85 to SGD2.90.

Units of the REIT are currently listed on the Singapore Exchange at SGD2.67.

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Ridzwan Rahmat has been analysing Singapore-listed REITs and business trusts, since 2008. For disclosure purposes, Ridzwan is currently vested in Mapletree Greater China Commercial Trust, Mapletree Industrial REIT and Mapletree Logistics Trust.

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