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What Investors Need to Know About Ascendas REIT’s Latest Earnings

Ascendas Real Estate Investment Trust (SGX:A17U), or a-REIT, released its second-quarter earnings report yesterday. The reporting period was from 1 July 2014 to 30 September 2014. It is the largest business space and industrial REIT with 106 properties mainly located in Singapore, and a couple of properties in China. At the local front, its properties range from Business Park Properties to Integrated Development, Amenities & Retail properties.

Financial Highlights

Gross revenue rose to $164.8 million in the latest quarter, up 8.6% from the quarter a year ago. Net property income also went up by 7.0%.

For the second quarter of 2014, a-REIT will distribute 3.66 cents per unit, up 1.7% from last year’s quarter. Speaking of distributions, the REIT recently changed its distribution policy to a semi-annual distribution instead of the previous quarterly distribution. So, including the 3.64 cents from the first quarter, the semi-annual distribution of 7.30 cents will be paid out of on 28 November 2014.

The total portfolio value stands at $7.9 billion.

Foolish investors might want to keep up an eye with the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded, and its sensitivity to the interest rate environment. This is summarised below.

Aggregate Leverage 32.6%
Interest Cover* 6.2
Weighted Average Debt Maturity 4.0 years
Unencumbered borrowings 85.8%
All-in Interest Rate 2.7%
Total Borrowings $2.561 billion

Source: REIT earnings presentation

On top of that, a-REIT has been able to hedge 68.8% of its total borrowings. It’s noteworthy that no more than 20% of its debt is due for refinancing in any single year.

Operational Highlights

Ascendas REIT ended the quarter with a 87.2% committed occupancy, a dip from the 88.1% recorded last quarter. The REIT has around 1,360 tenants which are widely distributed among sectors like Machinery & Equipment, 3rd Party Logistics, Information Technology and more. It also managed to complete three asset enhancement initiatives (AEI) worth $25.4 million during the quarter.

Looking ahead, a-REIT has committed to a total of $106.5 million on AEI for the second half of the current financial year. For the next financial year, it is looking to spend $25.6 million on AEI. On the acquisition front, the REIT has also completed the purchase of Apera, a newly completed mixed-use development for sizable $458 million. The new facility has 57 years in remaining lease tenure and currently has a low 49.6% committed occupancy. The REIT also has a property under development (DBS Hub Asia Phase 2) worth $21.8 million.

Foolish summary

Ascendas REIT is also one of the cool companies in Singapore which have been sharing the webcast of its earnings presentation since 2009. It is worthy to note that its performance fee for management is linked to the performance of its distribution per unit (DPU). In this case, the management team will be obliged to exceed a growth of 2.5% in DPU order to obtain the performance fee. A base fee of 0.5% on adjusted deposited property still remains.

Ascendas REIT last traded at S$2.3o on 23 October 2014. That translates to a distribution yield of around 6.3%, and a historical price-to-book ratio of 1.11. For more company news and analyses, sign up now for a FREE subscription to The Motley Fool’s weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.