Thursday, June 26, 2014
Ascendas REIT: Ascendas REIT proposed to acquire Hyflux Innovation Centre from Hyflux for $191.2m on a sale-and-leaseback arrangement. The 43,434 sqm gfa 10-storey prime high-specifications building located at 80 Bendemeer Road has a lease till 2068 and an occupancy rate of 83.9%, with tenants that include Hyflux, tech solutions provider NEC, healthcare supplier Covidien and American Express. Hyflux has commited to lease 50% gfa for a 15-year period, as well as provide rental support for the vacant space (16.1% gfa) in the property for three years. Proforma DPU for FYMar14 post acquisition of the property will be boosted by 0.8% to $0.144 and will extend A-REIT's weighted lease expiry profile to 3.96 years. DB cites that the recent share price volatility on the counter after its recent inclusion into the STI may present a potential opportunity for investors. Key thesis include sound fundamentals on firm occupancy levels and stable rental rates, which would be boosted by the trust's continued asset enhancement works across its portfolio, while the kicker for DPU growth may come from further asset acquisitions, especially in green field development projects in China. Gearing for Ascendas REIT remains conservative at 30%. FY15 distribution yield of 6.4%, above Mapletree Commercial Trust and CapitaCommerical Trust. House has a TP of $2.55 for the counter.