Ascendas Real Estate Investment Trust (SGX: A17U) released its full-year earnings for FY14/15 (fiscal year ended 31 March 2015) yesterday evening. If you are working in a place like Changi Business Park, you probably have seen many buildings with the Ascendas’ logo on them. Having been listed since 2002, Ascendas REIT is currently the largest listed business space and industrial REIT in Singapore with 106 properties located here (104 are in Singapore) and in China. These properties cover a wide spectrum; thrown in the mix are business and science parks, hi-specs industrial properties, light industrial properties, logistics and distribution centres, integrated…
Ascendas Real Estate Investment Trust (SGX: A17U) released its full-year earnings for FY14/15 (fiscal year ended 31 March 2015) yesterday evening.
If you are working in a place like Changi Business Park, you probably have seen many buildings with the Ascendas’ logo on them. Having been listed since 2002, Ascendas REIT is currently the largest listed business space and industrial REIT in Singapore with 106 properties located here (104 are in Singapore) and in China.
These properties cover a wide spectrum; thrown in the mix are business and science parks, hi-specs industrial properties, light industrial properties, logistics and distribution centres, integrated development, amenities, and retail properties.
Collectively (and as of 31 March 2015), these properties have a total gross floor area of 2.99 million square metres and make up the bulk of the REIT’s total asset value of S$8.16 billion.
With these as a backdrop, let’s dive into Ascendas REIT’s latest set of figures.
Ascendas REIT saw its gross revenue for FY14/15 climb 9.8% to S$673.49 million compared to a year ago. Consequently, net property income increased by 6.1% to S$462.73 million.
The top-line growth can be attributed to a mix of factors as highlighted below:
- The acquisitions of Hyflux Innovation Centre (HIC) and Aperia in June 2014 and August 2014, respectively.
- Full year contribution from Nexus @ one-north and A-REIT City @ Jinqiao.
- Positive rental reversion at certain properties.
Partly as a result of the improvement in gross revenue and net property income, Ascendas REIT ended FY14/15 with a 2.7% increase in annual distributable amount to S$351.1 million. This in turn led to the REIT’s annual distribution per unit (DPU) stepping up by 2.5% to 14.60 Singapore cents.
Source: Ascendas REIT’s earnings releases
From the table above, the changes in Ascendas REIT’s financial health had been mixed during the year.
It’s good to see the REIT improve its interest coverage ratio, lengthen the average maturity of its debt, and maintain its cost of borrowing (i.e. interest rate). But, investors might want to watch the increase in the level of borrowings, the higher aggregate leverage, and the larger total to EBITDA ratio.
Investors might also want to note that the REIT has a total of S$1.31 billion worth of borrowings coming due in 2015, 2016 and 2017. The progress on the refinancing of these loans would be important to observe.
Meanwhile, Ascendas REIT ended FY14/15 with an adjusted net asset value per unit of S$2.05 up 3.5% from a year ago.
Operationally, Ascendas REIT ended FY14/15 with a portfolio occupancy rate of 87.7%, down from 89.6% a year back. The REIT’s weighted average lease to expiry as of 31 March 2015 was 3.8 years, down slightly from 3.9 years a year ago. Rental reversions were a healthy 8.3% in FY14/15, but that’s down from the rate of 14.8% enjoyed a year ago.
Tan Ser Ping, Chief Executive Officer of Ascendas REIT’s Manager, gave a nice summary of the REIT’s year:
“Capitalising on available market opportunities, A-REIT’s portfolio grew to S$8.2 billion from S$7.4 billion a year ago, mainly through the addition of Aperia, Hyflux Innovation Centre and The Kendall.
In FY14/15, we continued to focus on broadening and deepening our tenant base, and increase the proportion of our business and science park, integrated development and high-specifications segments to make up 64% of our portfolio. Given the changing and challenging landscape in Singapore, we will continue to explore other opportunities for growth.”
From what I can make out from the earnings release, Ascendas REIT has many positives going for it, such as a diverse tenant base spread over 20 industries and a healthy occupancy rate of 87.7% (as mentioned earlier).
To add to that, the management team is expecting positive rental reversions when it renews leases that are due in FY15/16 as they are currently below the market rate. Also, management commented that “there could be potential upside” when some of the 12.3% of vacant space is leased.
Nevertheless, investors will have to take note of the headwinds in the near term such as a lackluster industrial property market and a temporary dip in the REIT’s occupancy rates due to conversions of single single-tenant buildings into multi-tenanted ones.
At its current price of S$2.68, Ascendas REIT is trading at 1.3 times its adjusted book value.
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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 James Yeo doesn't own shares in any companies mentioned.