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2 Things That Investors Should About Ascendas Real Estate Investment Trust Now – Latest Result & Valuation

Ascendas Real Estate Investment Trust (SGX: A17U) or Ascendas REIT owns properties that are used for either commercial or industrial purposes, or both. Ascendas REIT has 103 properties in Singapore and 29 properties in Australia.

In this article, we will look at two things about the REIT, namely, the latest financial performance and valuation.

Latest financial result

Source: Ascendas REIT FY17/18 Quarter 1 Result Release

The latest quarterly performance was nicely summarised up by the CEO, Chia Nam Toon, as follows:

“We are pleased to report an improvement in portfolio occupancy together with a slight positive rental reversion in Singapore. However, Singapore’s industrial property market still remains soft amid the intense competition for tenants. Potential new supply of industrial space for the remaining of 2017 is expected to put pressure on rental rates and occupancy.

We are continually investing in growth whilst reshaping our portfolio to enhance returns to Unitholders. This is evident through our recent acquisition in Melbourne, re-development and asset enhancement projects in Singapore, as well as divestment to recycle capital.”

In summary, the company performed positively, despite the soft property market due to new supply of industrial space, with all metrics coming in better than the same period last year.

Valuation

Valuation is an important metric to help investors decide on the right price to pay for an investment. Ideally, we want to pay a fair price for our investment.

Here, two simple metric can be used to evaluate the valuation of a REIT, namely price-to-book ratio and distribution yield.

What we will do here is to compare Ascendas REIT’s ratios to that of the average ratios of 39 REITs listed on Singapore Exchange.

Source: SGX.com stockfact

From the above, we can see that Ascendas REIT is trading at a discount to the market average in term of distribution yield, whilst its price to book ratio is trading at 24% premium to the market average.

Conclusion:

Overall, Ascendas REIT delivered a positive performance in the first quarter of FY 17/18. In term of valuation, it is trading at a premium indicated by the high price to 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 Lawrence Nga doesn’t own shares in any companies mentioned.