From a standing start with just eight properties worth around S$600m in 2002, Ascendas Real Estate Investment Trust (SGX: A17U) has grown into a real-estate titan with 104 properties to its name.
The company, which is often referred to simply as A-REIT, was recently promoted to the top-flight of the Singapore stock market. Over the last 12 years, the company has delivered a total return of 15.6%. In other words, a $1,000 investment in the REIT would have turned into S$5,625 today.
A-REIT’s notable performance is thanks in part to its impressive Return on Equity (RoE). At around 10%, the company is generating S$10 for every $100 of funds invested by shareholders
The above-average RoE is thanks in part to a high Net Income Margin of 74%. It implies that Ascendas REIT has delivered S$74 of bottom-line profit for every $100 of top-line sales. High Net Income Margins are not that unusual amongst the REITs. Mapletree Logistics Trust (SGX: M44U) generated S$72 on every S$100 of revenues last year, while CapitaCommercial Trust (SGX: C61U) generated about S$95.
Asset Turnover is rarely a strong point for Real Estate Investment Trusts, primarily because of their high asset base brought about by high property cost. Ascendas REIT only generates around $0.085 for every dollar of asset employed in the business. The market average is about five times higher.
Unsurprisingly, Ascendas REIT has debts but it is not overly burdened by loans. Its Leverage Ratio of about 1.6 is below the average for the 30 companies that make up the Straits Times Index (SGX: ^STI).
By unlocking the Return on Equity for Ascendas REIT, it is easy to understand the numbers that elevate of the company. Its RoE of 15.6% is the product of a high Net Income Margin of 74%; a low Asset Turnover of 0.085 and a dollop of Leverage of 1.6.
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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 Director David Kuo doesn’t own shares in any companies mentioned.