12 things to know about Ascendas REIT before you invest (updated 2019)

Ascendas REIT (A-REIT) is the first industrial REIT listed on the SGX. It owns a portfolio of business & science park properties, high-specification industrial properties, data centres, light industrial properties, flatted factories, integrated development amenities & retail properties, and logistics & distribution centres located across Singapore, Australia, and the UK.

Presently, A- REIT is worth S$9.5 billion in market capitalisation and is, thus, the largest industrial REIT in Singapore. In this article, I’ll cover its recent developments in 2019, latest annual results, and stock valuation.

Here are 12 things to know about Ascendas REIT before you invest:

1. A-REIT’s portfolio value grew 10.1% year-on-year from S$10.1 billion in 2018 to S$11.1 billion in 2019.

Source: Ascendas REIT 2019 annual report

Growth was mainly attributed to the acquisition of new investment properties in Australia and the UK, the completed redevelopment of 20 Tuas Avenue 1, and asset enhancement initiatives (AEIs) for five existing properties in Singapore. A-REIT currently owns 171 properties in total.

Source: Ascendas REIT annual reports

2. A-REIT’s Singapore portfolio value grew from S$8.65 billion in 2018 to S$8.77 billion in 2019. This is despite the divestment of 30 Toh Tuck Road and 41 Changi South Avenue 2 during the year, which was offset by the increase in value from the redevelopment of 20 Tuas Avenue 1 and AEIs on five other properties.

PropertyCost (S$ millions)Completed
20 Tuas Avenue 161.4Apr 2018
21 Changi South Avenue 24.5Apr 2018
KA Centre, KA Place, and 1 Jalan Kilang7.8Jun 2018
Nordic European Centre8.5Jan 2019
Aperia11.8Jan 2019
138 Depot Road3.9Mar 2019

3. A-REIT’s Australia portfolio value increased from S$1.56 billion in 2018 to S$1.65 billion in 2019. The REIT acquired four new properties and now owns 35 properties in the country.

PropertyPurchase Price (S$ millions)Acquired
169 - 177 Australis Drive34.54 Jun 2018
1314 Ferntree Gully Drive16.426 Jun 2018
1 -7 Wayne Goss Drive30.87 Sep 2018
Cargo Business Park33.94 Oct 2018

4. A-REIT entered the UK market in 2019 with the acquisition of 38 properties for S$832.4 million in two tranches. On 16 August 2018, Ascendas REIT completed the acquisition of the first tranche of 12 freehold distribution centres for S$373.3 million. The properties are all fully occupied and count DHL, Amazon, and Howden Joinery as key tenants.

Source: Ascendas REIT

On 4 October 2018, Ascendas REIT completed the acquisition of the second tranche of one leasehold and 25 freehold distribution centres for S$459.2 million. The properties are also fully occupied and have Aston Martin, Royal Mail, Amethyst Group, Eddie Stobart, Sainsbury, and Vax as key tenants.

Source: Ascendas REIT

5. A-REIT’s total revenue and distributable income have grown at an annualised rate of 8.8% and 8.4% respectively from 2010 to 2019. This is mainly due to acquisitions and asset enhancement initiatives during the period.

Source: Ascendas REIT annual reports

Likewise, distribution per unit (DPU) has steadily grown from 13.1 cents in 2010 to 16.04 cents in 2019.

Source: Ascendas REIT annual reports

6. As at 31 March 2019, A-REIT has a gearing ratio of 36.3% and an A3 credit rating from Moody’s. Average cost of debt is 3.0% and 83% of debt is at fixed interest rates. Average debt to maturity is 4.0 years.

7, As at 31 March 2019, A-REIT has a portfolio occupancy rate of 91.9%. The REIT has 1,360 tenants and the 10 largest tenants accounted for 20.2% of revenue in 2019.

Top 10 TenantsPercentage of Gross Revenue (2019)
Singapore Telecommunications Ltd4.8%
DSO National Laboratories3.1%
Citibank, N.A.2.1%
DBS Bank Ltd2.0%
Westfarmers Group1.6%
Ceva Logistics S Pte Ltd1.5%
JP Morgan Chase Bank, N.A.1.5%
A*STAR Research Entities1.2%
Siemens Pte Ltd1.2%
Federal Express Corporation1.2%

The REIT has a weighted average lease expiry of 4.2 years. Sixteen percent of leases will expire in FY2020 with the majority coming from Singapore.

Source: Ascendas REIT FY2018/19 results presentation

8. As at 31 March 2019, A-REIT has a weighted average land lease expiry of 44.6 years. The REIT’s acquisition of Australia and UK properties are mostly freehold or have a lease period of 965- 999 years (as good as freehold).

Source: Ascendas REIT 2019 annual report

9. A-REIT is constructing two build-to-suit buildings in one-north business park. The development costs S$181.2 million and is scheduled for completion in Q3 2021. Upon completion, the buildings will be leased for 11 years to GrabTaxi Holdings Pte Ltd at initial net property yield of 6.4%.

Source: Ascendas REIT

10. A-REIT is redeveloping 25 and 27 Ubi Road 4 in Singapore for S$35.0 million. The project involves the demolition of two light industrial buildings and redeveloping them into a single high-specification industrial building. It is scheduled for completion in Q1 2022.

11. P/B ratio: As at 31 March 2019, A-REIT has a net asset value per unit of S$2.13. Based on its share price of S$3.08 (as at 15 August 2019), A-REIT’s P/B ratio is 1.45 which is well above its 10-year average of 1.21.

12. Dividend yield: A-REIT paid a DPU of 16.035 cents in FY2019. Therefore, its current distribution yield is 5.21%, the lowest in 10 years.

The fifth perspective

Ascendas REIT has a solid track record of delivering consistent growth in revenue, DPU, and NAV over the past 10 years. The recent acquisition of Ascendas-Singbridge (A-REIT’s sponsor) by CapitaLand in April 2019 also hints at potential synergies with CapitaLand’s sister REITs in the future. However, A-REIT’s presently high valuation means that investors may prefer to wait for a more opportune time to consider the stock.

Ian Tai

Financial content machine. Dividend investor. Produced 450+ financial articles featured on KCLau.com in Malaysia and The Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular host and presenter of a weekly financial webinar with KCLau.com. Co-founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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