Ascendas REIT

Ascendas REIT: OCBC upgrades to Buy from Hold with $2.63 TP. House turning positive on Ascendas REIT (A-REIT). Its unit price has fallen by 22.7% from its peak of S$2.86 on 15 Apr, due partly to concerns on an early tapering of US Federal Reserve’s quantitative easing programme and an accompanying hike in interest rates. Based on house analysis on interest rates, however, believe that the impact on A-REIT’s DPU and book value is likely to be limited, as a considerable 74.8% of its total debt is fixed and the weighted average term of debt is a long 3.9 years. At present, A-REIT is trading at 1.14x P/B, even lower than some of its peers’ P/B ratios in the industrial REIT space, which are hovering around the 1.2x mark. In addition, A-REIT’s forward DPU yield of 7.2% is comparable to the subsector average yield of 7.5%. This is despite the fact that A-REIT is the largest Singapore-listed industrial landlord by market cap and portfolio size.