Ascendas REIT

Ascendas REIT (A-REIT): 2QFYMar14 DPU in line with street estimates at 3.6¢ (+2% y/y). Distributable income rose 9.3% y/y to $86.4m as NPI of $107.1m (+4.1%) was achieved on the back of its Galen acquisition and positive rental reversion (10.8%) across all segments. Notably, current market rental rates are between 11-41% higher than A-REIT's current weighted average passing rentals due for renewal in FY13/14. Occupancy across its portfolio dropped to 83.9% (-5.4ppts) due to the completion of A-REIT City@Jinqiao and Nexus@one-north during the quarter, having achieved 25.3% and 73.9% of leasable space pre-committed respectively, with an overall weighted average lease to expiry of 3.9 years. Balance sheet is strong with a leverage of 29.7% and is expected to increase to 30.5% post the funding of the committed investments ($137m mainly in AEIs). Weighted term of debt of 3.5 years with an average cost of 2.74%. A-REIT has a 6.0% FY14 yield and remains as DB's preferred pick as house expect firm growth driven by positive rental reversions. On the other hand, CIMB downgrades A-REIT to NEUTRAL, citing that its ability to grow further is hindered by the structure of its performance fees. Latest broker ratings' as follows: DB maintains Buy with TP $2.70 CS maintains Neutral with TP $2.48 CIMB downgrades to Neutral with TP $2.47