Hot stock: Ascendas falls 6.3% on dilutive plans to raise S$408m

SHARES of Ascendas Real Estate Investment Trust (A-Reit) fell 6.3 per cent early on Thursday after the industrial and commercial property trust said it was raising about S$408 million of equity capital.

The shares were trading at S$2.23 as at 11.30am. With 17 million shares having changed hands, the counter was the second-most active stock by volume on Singapore Exchange.

A-Reit said before the market opened that it will sell 90 million of new units to institutional and other investors through a S$200.1 million private placement at S$2.223 per unit, the low end of the S$2.223 to S$2.290 range used during book building. The placement price represents a 6.2 per cent discount to A-Reit's volume-weighted average trading price of S$2.3706 on Dec 8.

A-Reit will also offer existing unitholders new units at S$2.218 apiece, or five Singapore cents below the placement price, on the basis of three new units for every 80 held. The rights offering will raise at least S$207.9 million.

A further S$0.4 million of units could be issued to the manager as fees.

About S$224.7 million of the proceeds will be used to help pay for the planned S$420 million acquisition of One@Changi City; another S$82 million will be used to help pay for a potential acquisition of a logistics property in Australia that has yet to be confirmed; about S$98.8 million will be used to repay debt and fund future acquisitions; and the remaining S$2.8 million will be used for fees and expenses.

A-Reit will also issue S$210 million of new units to Ascendas Frasers Pte Ltd, the vendor of One@Changi City, as consideration for the acquisition. Ascendas Frasers is an equally owned joint venture between Frasers Centrepoint and A-Reit controlling unitholder Ascendas Pte Ltd.

OCBC analyst Andy Wong cut his target price for the counter to S$2.50 from S$2.58 given the dilutive impact of the fund-raising. He also reduced his forecast for distributions per unit by 1.3 per cent for fiscal 2016 and by 3.2 per cent for fiscal 2017.

Mr Wong maintained his "buy" rating for the stock.