Brokers' take: Analysts maintain calls on Ascendas Reit, positive on diverse portfolio

ANALYSTS continue to like Ascendas Real Estate Investment Trust (Ascendas Reit) for its resilient and well-diversified portfolio and growth visibility.

This comes as the Reit on Tuesday posted a lower distribution per unit (DPU) of 7.418 Singapore cents for its second half ended Dec 31, 2020, meeting UOB Kay Hian's expectations. The Reit's full-year DPU of 14.688 cents met CGS-CIMB's expectations, but was below DBS Group Research's projections.

In separate reports on Wednesday, DBS, Maybank Kim Eng and UOBKH maintained their "buy" calls on the Reit.

Both DBS and Maybank KE had an unchanged target price (TP) of S$4 and UOBKH's TP on Ascendas Reit is S$3.68. RHB stayed "neutral" with a raised TP of S$3.15 from S$3, while CGS-CIMB reiterated "add" with an increased TP of S$3.25 from S$3.20. Units of Ascendas Reit were closed 1.9 per cent or S$0.06 higher at S$3.16 on Wednesday. This implies an upside of 26.6 per cent for the TPs of DBS and Maybank KE, as well as an upside of 16.5 per cent and 2.8 per cent for UOBKH and CGS-CIMB respectively. The Reit's closing price of S$3.16 was 0.3 per cent lower than RHB's TP.

In a research note on Wednesday, DBS noted Ascendas Reit's attractive valuations relative to other large-cap industrial peers, which are trading at 5.2 per cent forward yield and 1.4 times price to net asset value.

"We believe investors have neglected Ascendas Reit's myriad of structural tailwinds from e-commerce and office decentralisation which we believe will drive earnings and capital values higher in the longer term," DBS said.

However, RHB does not find the Reit's valuation compelling despite positives, as the counter trades at 1.4 times price-to-book ratio and a dividend yield of 5 per cent. It noted that Ascendas Reit remains one of the most defensive industrial Reits.

"Share price has underperformed over the last three months mainly due to an overhang from large equity fundraising and pending acquisition," RHB said.

Looking ahead, RHB has revised lower its FY2021-22 DPU forecast for Ascendas Reit by 1-4 per cent, factoring in the slight delay of acquisition or asset redevelopment completion.

CGS-CIMB also cut its FY2021-22 DPU forecast for the Reit by 2.07-2.53 per cent. This is to factor in the effect of the equity fundraising exercise and adjust for the latest forward portfolio lease expiry profile.

DBS expects Ascendas Reit's manager to announce the acquisition of a European data centre portfolio soon as it understands negotiations are on track. It assumes the portfolio is valued at S$1 billion and included this assumption into its valuations.

With the completion of the acquisition, as well as contributions from earlier acquisitions, DBS projects FY2021 DPU to rise by about 8 per cent.

RHB anticipates the acquisition to be completed by Q1 2021. It has factored the possible deal into its numbers at an estimated net property income yield of 5 per cent.

Maybank KE said Ascendas Reit's fundamentals remain strong, backed by its scale, rising DPU visibility, growth levers from a strong balance sheet and further overseas diversification.