Since its listing back in November 2002, Ascendas Real Estate Investment Trust (SGX: A17U) has managed to actively grow its portfolio to become the largest REIT in Singapore’s stock market today. This is by no means a small feat, considering that Singapore is home to around 40 REITs and property trusts.
However, size is by no means the be all and end all. The ability of the trust to grow its distributions to unit holders and its book value on a per unit basis is perhaps of even more importance.
As I did with a few other REITs in previous articles, I want to take a look at three key performance indicators of Ascendas REIT that will give us more colour on whether the trust has grown its value for unitholders since its listing.
As quick introduction, Ascendas REIT generally invests in industrial properties in Singapore and Australia. As of 31 December 2017, it had a portfolio of 131 properties valued at around S$10.2 billion. With that, let’s take a look at how it has performed over the years.
Net asset value per unit
The first metric that will give us a better idea on the growth of unitholder value over the years is the net asset value per unit, or NAV per unit. The NAV per unit is the total assets, less liabilities, divided by the number of outstanding units. Mathematically, it is represented by the following equation:
Net Asset Value Per Unit = (Total Assets – Total Liabilities) / (Number of outstanding units)
In 2003, Ascendas REIT had a net asset value per unit of S$0.91. The trust has since grown its NAV per unit by more than 100% to $2.03 per unit on 31 December 2017 after taking into account the distributions for that reporting period. This translates to an impressive compound annual growth rate (CAGR) of 6.37%.
Unsurprisingly, Ascendas REIT’s unitholders have been rewarded – the REIT’s unit price has steadily increased along with its NAV per unit, from S$0.88 on its IPO date to its current unit price of S$2.64.
Net property income per unit
The net property income (NPI) per unit will give us more information on the REIT’s ability to grow its earnings capacity, while taking into account any dilutive impact from additional units issued.
Ascendas REIT has likewise performed very well in this respect. It has grown its NPI per unit from just S$0.06 in 2003 to S$0.21 in FY2016/17 (fiscal year ended 31 March 2017). This is a commendable CAGR of 10.44%.
Distributions per unit
Perhaps of most importance to unitholders is the distributions that they receive. The changes to a REIT’s distributions per unit over time will also tell us how well the REIT is managing its expenses.
Once again, Ascendas REIT has scored well in this aspect. Below is a chart showing the REIT’s DPU growth since its IPO.
Source: Ascendas REIT March Investor Presentation
We can see that the REIT has grown its distributions per unit at a CAGR of 5.2%, from 7.63 cents in FY2002/03 to 15.74 cents in FY2016/17. What is even more impressive is that the REIT has managed to do this while maintaining a strong balance sheet. In fact, between FY07/08 and FY16/17, the REIT even managed to strengthen its balance sheet by lowering its gearing from 38% to 33.8%, while increasing its distribution per unit at the same time.
The Foolish bottom line
Ascendas REIT has managed to consistently reward unitholders since it first listed more than 10 years ago. Besides growing its distributions per unit, the REIT has also managed to consistently increase its NAV per unit while keeping its gearing at very manageable levels. To me, this is reflective of management’s prudent capital recycling strategies and eye for attractive acquisitions.
Furthermore, there seems to be further room for growth as the REIT now has a gearing ratio of just 33.8%. This gives the REIT debt headroom to make more yield accretive acquisitions. If the past is anything to go by, Ascendas REIT’s unitholders will most certainly be able to look forward to continued growth in the coming years.
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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 Jeremy Chia doesn’t own shares in any companies mentioned.