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3 Things Investors Should Know About Ascendas Real Estate Investment Trust’s Business

Ascendas Real Estate Investment Trust (SGX: A17U) is the largest REIT in Singapore that focuses on business spaces and industrial properties. As of 31 December 2016, the REIT’s portfolio comprises 102 properties in Singapore and 28 in Australia.

Here are three things about Ascendas REIT’s business that investors may want to take note of:

1. Growth seen in latest earnings

The table below shows some of the important financials for Ascendas REIT for the quarter ended 31 December 2016 (3Q FY16/17) and the quarter ended 31 December 2015 (3Q FY15/16):

Ascendas REIT income statement table
Source: Ascendas REIT earnings presentation

During the reporting quarter, the REIT managed to grow its gross revenue, net property income, as well as distribution per unit when compared to the same period a year ago.

2. Current occupancy rates

The occupancy rate for a REIT is an important metric to look at since it gauges the strength of the market demand for the REIT’s properties.

Here’s a chart showing the portfolio occupancy rates for Ascendas REIT for 3Q FY16/17, 2Q FY16/17, and 3Q FY15/16:

Ascendas REIT portoflio occupancy chart
Source: Ascendas REIT earnings presentation

We can see that Ascenads REIT’s total occupancy rate is only 90.2%, indicating that nearly 10% of its portfolio is not occupied by tenants. But, there’s a silver lining: The overall occupancy rate of 90.2% in December 2016 is higher than that seen in both September 2016 and December 2015.

3. A diversified portfolio

It is important that a REIT does not depend too heavily on any one particular asset as a source of income to improve the overall stability and sustainability of its long-term performance. The chart below shows the weighting that each type of property currently represents in Ascendas REIT’s portfolio:

Ascendas REIT property-type chart
Source: Ascendas REIT earnings presentation

As you can see, Ascendas has a diversified portfolio with no single type of property accounting for more than 18% of its total asset value.

Ascendas REIT tenant diversification chart
Source: Ascendas REIT earnings presentation

Moreover, Ascendas REIT’s tenants come from more than 20 industries and there’s no industry which makes up more than 10.8% of its gross revenue. As of 31 December 2016, the REIT’s top 10 tenants collectively accounted for just 19% of its gross rental income.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.