Tuesday, October 4, 2011

Ascendas REIT

Ascendas REIT: Announced its maiden acquisition in Beijing, a business park property for Rmb300m (S$62m) for the property. Mgt earlier in Feb announced the forward purchase of a business park property in Shanghai for Rmb588m and this latest acquisition is in line with strategy to expand in gateway cities in China with focus on the business and science park segment.

The property is currently 100% occupied with Baidu and Raisecom Technology as major tenants. Detusche tips acquisition to be yield accretive and estimates NPI yield of 8% vs its Shanghai ppty at 8.8%) which contributes 0.02c/unit accretion to pro-forma FY11 DPU assuming 60:40 equity:debt structure. Portfolio passing rent of Rmb3.20 psm/day is below current mkt rent of Rmb3.60 psm/day which should lift NPI yield to the mid-8% level as leases revert to market.

AREIT's gearing is estimated to increase from the current 28.7% to 35.6% after this acquisition and other capital commitments, which is still conservative vs. peers. Deutsche maintains Buy with $2.30 TP, while SCB has ‘In-Line’ Call with $2.14 TP.

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