Brokers' take: Phillip Capital lowers price on Ascendas Reit after acquisition of data centres

PHILLIP Capital maintained its "buy" call on Ascendas Real Estate Investment Trust (Ascendas Reit) in a Tuesday report.

This came after Ascendas Reit announced its S$904.6 million acquisition of 11 data centres in Europe on March 17.

The research team believes that the purchase will strengthen Ascendas Reit's portfolio, as it increases the Reit's diversification from 36 per cent to 40 per cent, and raises its exposure to data centres from 4 per cent to 10 per cent.

The financial house now has a target price of S$3.64, S$0.09 lower than its initial S$3.73.

Other institutions, namely UOB Kay Hian (UOBKH) and CGS-CIMB, also responded to the acquisition in their respective reports on Thursday.

Phillip Capital's target price shifted away from that of UOBKH, which raised its target price to S$3.82 from S$3.68 previously. Meanwhile, the price gap between Phillip Capital and CGS-CIMB narrowed as the latter raised its target price to S$3.30 from S$3.25 previously.

The report also noted that the data centres will improve the Reit's earning visibility as 83 per cent of its leases have 1 per cent to 3 per cent rental escalations.

Analyst Natalie Ong described the acquisition as "accretive", as she expected it to lift the Reit's distribution per unit (DPU) by 1.3 per cent on a pro forma basis.

Phillip Capital had anticipated the acquisition to arrive four months later with a larger portfolio. To adjust, it raised its FY2021 DPU by 0.3 per cent to 10.6 per cent and lowered its FY2022 to FY2025 DPUs by 2.2 per cent to 2.7 per cent.

Ascendas Reit "remains our top pick for the sector in view of its scale and diversification", added Ms Ong.

Units of Ascendas Reit fell S$0.11 or 3.57 per cent to S$2.97.