Ascendas Real Estate Investment Trust’s Latest Earnings: What Investors Need to Know

Yesterday, Ascendas Real Estate Investment Trust  (SGX: A17U) released its second-quarter earnings report for its financial year ending 31 March 2017 (FY16/17). The reporting period was from 1 July 2016 to 30 September 2016.

As a quick background, the real estate investment trust (REIT) owns properties that are used for either commercial or industrial purposes, or both. Ascendas REIT has 102 properties in Singapore, 28 properties in Australia, and one business park property in China.

You can read more about the REIT in here.

Financial highlights

The following is a quick rundown on some of the latest financial figures for Ascendas REIT:

  1. Gross revenue rose to $205.4 million in the reporting quarter, up 12.5% from the same quarter a year ago.
  2. Following suit, quarterly net property income (NPI) rose by 23.1% year-on-year. For the reporting quarter, NPI came in at $152.4 million, compared to $123.8 million for the same quarter a year ago.
  3. Distribution per unit (DPU) for the second quarter of FY16/17 was 4.03 cents, which was a 3.1% decline from the same quarter last year.
  4. The REIT’s investment properties were valued at $9.5 billion on 30 September 2016.
  5. Ascendas REIT reported an adjusted net asset value per unit of $2.03 for the quarter, up slightly from the $2.02 seen a year ago.

Beyond these, Foolish investors might want to keep an eye on 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. These are summarized below:

Source: Ascendas REIT’s earnings presentation

Ascendas REIT’s total borrowings increased to $3.37 billion as of 30 September 2016. The average all-in borrowing cost also stepped up to 3.02% while the interest cover ratio was down to 5.3 times. As of 30 September 2016, the REIT’s weighted average debt to maturity was 3.8 years.

There are outstanding loans of $335 million to be refinanced for 2016. As always, Foolish investors should watch out for a REIT’s refinancing activities.

Operational highlights

For the reporting quarterAscendas REIT recorded higher revenue due to the acquisitions of properties in Australia and ONE@Changi.

The REIT ended the reporting quarter with an overall portfolio occupancy of 89.1% and a weighted average lease to expiry of 3.7 years. A year ago, these numbers were at 89.0% and 3.6 years, respectively.

Commenting on the quarter, Chia Nam Toon, the chief executive of Ascendas REIT’s manager, said:

“The Singapore industrial property market has remained challenging, weighed down by the slowing economy. Consequently, rental reversions were softer at +1%. However, portfolio occupancy improved to about 89% underpinned by new leases and expansion in the Australia and China portfolio respectively.”

Looking forward, Ascendas REIT also has S$113.1 million worth of ongoing asset enhancement initiatives (AEI) and redevelopment projects. The REIT also commented that the “industrial property market condition in Singapore is expected to remain challenging.”

But, Ascendas REIT’s manager still expects the REIT to turn in a stable performance for FY16/17.

Ascendas REIT’s units closed at a price of S$2.43 yesterday. This translates to a historical price-to-book ratio of 1.2 and a trailing distribution yield of 6.3%.

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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.