Ascendas REIT (SGX: A17U) Reported 5.4% Increase In DPU
Ascendas REIT (SGX: A17U) has recently announced its first half 2021 financial results. It is currently trading at 4.7% yield based on the last traded share price on 2 Aug.
Key Highlights:
Distribution per unit (DPU) and Dividend Yield (4.7%)
Price to book ratio (1.4)
Gearing (38%)
Interest coverage ratio (4.6x)
Portfolio occupancy rate (90.6%)
Growth catalyst
Background of Ascendas REIT
Ascendas REIT was the second REIT listed on Singapore Stock Exchange in 2002. It is the biggest REIT with a focus on managing industrial properties. The REIT owns and manages a portfolio of industrial properties in Singapore, Australia, the United Kingdom and the United States.
Ascendas REIT is managed by Ascendas Funds Management Limited, which is owned by Capitaland Limited (SGX: C31). The REIT is listed on several indices, which include the FTSE Straits Times Index, the Morgan Stanley Capital International, Inc (MSCI) Index, the European Public Real Estate Association/National Association of Real Estate Investment Trusts (EPRA/NAREIT) Global Real Estate Index and Global Property Research (GPR) Asia 250.
1. Distribution per unit and dividend yield
In its 1H 2021 financial results, Ascendas REIT delivered a very healthy first half 2021 operational performance. Its distributable income was up 18.2% year-on-year. And DPU was up by 5.4%, this was mainly due to the contributions from 2 new office buildings in San Francisco and 11 new data centres in Europe.
Based on its latest price, the REIT is currently trading at about 4.7% dividend yield. Historically, the REIT has been paying very consistent DPU, with steady growth over the years. However, its current 4.7% yield is at the low side as compared to its average yield of 6% over the past 10 years.
2. Price to book ratio
Over the past 10 years, Ascendas REIT has been trading at an average price to book ratio of 1.2. Its ratio of 1.4 does not look attractive as it is still well above its historical average.
3. Gearing
Portfolio leverage goes up slightly to 38% after the recent acquisitions. However, this still gives Ascendas REIT an ample debt headroom for future growth and acquisitions.
4. Interest coverage ratio
The REIT has an interest coverage ratio of 4.6 times (increased from 4.2 times previously), which is just slightly above our preference of 4 times. Besides, the REIT maintains an overall interest cost of 2.2%. Ascendas REIT continues to maintain a healthy balance sheet which enables its access to wider funding options at better rates.
5. Portfolio occupancy rate
Portfolio occupancy remains high at 90.6%. Its United Kingdom's portfolio maintains a high occupancy rate of 98.6%. Singapore occupancy rate slid to 86.9%. Its oversea portfolio continues to maintain high occupancy rate. The REIT continues to attract demand from various industries.
6. Growth Catalyst
The management believes that Ascendas REIT is well placed to benefit from the key trends of digitalisation, given that business spaces and data centres are now making up 80% of its portfolio. The latest addition to its portfolio is the built-to-suit business park property that will house the headquarters of Grab. The property was handed over to Grab on July 30, and will be fully leased for 11 years.
Summary
The key financial metrics of the REIT still remain very healthy, we are still holding the REIT in our portfolio. However, we think that the price does not look attractive at current level. Join our newsletter today by clicking the link below to know when is the good time to increase positions.