Brokers' take

ESR-Reit > Buy OCBC Inv Research, Dec 14 Dec 14 close: S$0.50 Target price: S$0.59

AFTER completing a merger with Viva Industrial Trust on Oct 15, ESR-Reit is the fourth largest industrial Reit listed in Singapore, and the largest with an entirely Singapore-focused portfolio. According to our forecasts, ESR-Reit is trading at 0.9 times FY19F price/book (P/B) and offering a 7.8 per cent FY19F dividend yield. In comparison, its large cap peers are trading at an average P/B of 1.19 times and an average dividend yield of 6.5 per cent.

We see tangible merger synergies that are yet to be fully appreciated by the market. Furthermore, we believe it is an opportune time to gain exposure to the Singapore industrial space through the Reit. While we are wary of the back-end loaded supply injection expected in Q4 2018, we believe the relatively slower pace of supply increase from 2019 to 2022 will lead to a better demand-supply situation as well as a further improvement in rents. We derive a fair value estimate of S$0.59 for ESR-Reit using a dividend discount model. Initiate coverage on ESR-Reit with a "buy".