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

Singapore’s first and largest listed business space and industrial real estate investment trust (REIT), Ascendas Real Estate Investment Trust (SGX: A17U), announced its financial results for the second quarter yesterday. The reporting period was from 1 July 2017 to 30 September 2017.

Here’s a quick rundown on the financial figures from the earnings release:

1. Gross revenue for the quarter increased 5.1% year-on-year to S$215.8 million.

2. Net property income went up 5.3% to S$160.5 million.

3. The total amount available for distribution grew 5.6% to S$118.8 million.

4. Distribution per unit for the reporting quarter was 4.059 cents, up from 4.016 cents seen a year ago.

5. As of 30 September 2017, the net asset value per unit was S$2.13. This is an increase from 30 June 2017’s figure of S$2.08.

The growth in gross revenue was mainly due to contributions from newly acquired properties in the past year – 12, 14 and 16 Science Park Drive in Singapore, 197-201 Coward Street in Sydney and 52 Fox Drive Dandenong South in Melbourne. The contributions were partially offset by the divestment of A-REIT City @ Jinqiao.

During the quarter, two properties located in Singapore were divested to recycle capital and optimise returns for unitholders. Accounting gains (the difference between net proceeds and book value of the properties) of S$4.6 million were recognised for the divestments.

Despite the divestments, Ascendas REIT achieved a high portfolio occupancy rate of 92%, as of 30 September 2017. This is an improvement from 89.1% seen a year ago.

The REIT also achieved a favourable rental reversion of 3.1% for the latest quarter as compared to 0.9% obtained in the same quarter last year. The portfolio’s weighted average lease expiry by gross revenue stood at 4.2 years. About 8.1% of the REIT’s gross revenue will be due for renewal in the remaining months of the current financial year.

As of 30 September 2017, the trust had an aggregate leverage of 33.1%, down from 33.9% as of 30 June 2017. The weighted average all-in debt cost came in at 2.9%. 79.3% of the REIT’s borrowings are at fixed rates with an average term of 3.1 years.

Singapore’s industrial property sector continues to face headwinds from new supply. This brought about an island-wide vacancy rate of 11.4%, as of 30 September 2017, up from 11.3% three months before that. Going forward, rental rates and occupancy are expected to remain under pressure.

Ascendas REIT said that its performance for the current financial year is “expected to remain stable”. The units are now trading at S$2.72, translating to a price-to-book ratio of 1.28 and a trailing distribution yield of 5.9%.

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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 Sudhan P doesn’t own shares in any companies mentioned.