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 13 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.
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.
2. A-REIT’s Singapore portfolio value grew from S$8.65 billion in 2018 to S$8.77 billion in 2019. This is despite the divestment of 30 Toh Tuck Road and 41 Changi South Avenue 2 during the year, which was offset by the increase in value from the redevelopment of 20 Tuas Avenue 1 and AEIs on five other properties.
|Property||Cost (S$ millions)||Completed|
|20 Tuas Avenue 1||61.4||Apr 2018|
|21 Changi South Avenue 2||4.5||Apr 2018|
|KA Centre, KA Place, and 1 Jalan Kilang||7.8||Jun 2018|
|Nordic European Centre||8.5||Jan 2019|
|138 Depot Road||3.9||Mar 2019|
3. A-REIT’s Australia portfolio value increased from S$1.56 billion in 2018 to S$1.65 billion in 2019. The REIT acquired four new properties and now owns 35 properties in the country.
|Property||Purchase Price (S$ millions)||Acquired|
|169 - 177 Australis Drive||34.5||4 Jun 2018|
|1314 Ferntree Gully Drive||16.4||26 Jun 2018|
|1 -7 Wayne Goss Drive||30.8||7 Sep 2018|
|Cargo Business Park||33.9||4 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.
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.
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.
Likewise, distribution per unit (DPU) has steadily grown from 13.1 cents in 2010 to 16.04 cents in 2019.
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 Tenants||Percentage of Gross Revenue (2019)|
|Singapore Telecommunications Ltd||4.8%|
|DSO National Laboratories||3.1%|
|DBS Bank Ltd||2.0%|
|Ceva Logistics S Pte Ltd||1.5%|
|JP Morgan Chase Bank, N.A.||1.5%|
|A*STAR Research Entities||1.2%|
|Siemens Pte Ltd||1.2%|
|Federal Express Corporation||1.2%|
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.
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).
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%.
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.
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