Brokers' take

ESR Reit | BUY (upgraded) Apr 25 close: S$0.52 Fair value: S$0.565 OCBC Investment Research, April 25

ESR Reit's Q1 2019 results were within expectations. Post-merger, Q1 2019 gross revenue increased 93 per cent to S$64.8 million or 26 per cent of our initial full-year forecast, with net property income (NPI) increasing 104 per cent to S$48.6 million. With the larger enlarged unit base and a S$2.1 million capital distribution, distribution per unit (DPU) increased 18.9 per cent year on year to 1.007 Singapore cents or 26.8 per cent of our initial full-year forecast. We consider this within expectations, albeit on the higher end of our forecasts.

We remain a little wary on ESR Reit's relatively high gearing ratio of 41.9 per cent, but we have previously baked in the risk of equity financing.