12 Key Facts About Ascendas Real Estate Investment Trust’s Latest Earnings

Yesterday evening, Ascendas Real Estate Investment Trust (SGX: A17U) released its second quarter earnings update for its fiscal year ending 31 March 2019 (FY 2018/2019). Here’s a quick introduction on what Ascendas REIT does for better context later: It owns properties that are used for either commercial or industrial purposes, or both.

The following are 12 things investors should know about Ascendas REIT’s latest results:

1. Gross revenue for the reporting quarter increased by 1.1% from S$215.8 million a year ago to S$218.1 million, mainly because of contributions from newly acquired properties in Australia and the UK.

2. Net property income, however, fell by 1.0% from S$160.5 million a year ago to S$158.9 million, as a result of a reversal of accrued property operating expenses in the second quarter of 2017/2018

3. Total amount available for distribution to unitholders declined by 3.1% year-on-year to S$115 million because of additional interest expenses. Ascenads REIT’s interest expense increased by 16.9% from S$26.4 million a year ago to S$30.8 million because of higher amounts of borrowings – total debt was S$3.59 billion in the reporting quarter, compared to S$3.41 billion a year ago.

4. Distribution per unit (DPU) declined by 4.2% year-on-year to 3.887 Singapore cents due to more units in existence – this relates to Ascendas REIT’s issuance of 178 million new units for S$2.54 each on 18 September 2018 for a private placement.

5. The total DPU for the trailing 12 months was 15.769 cents, and based on Ascendas REIT’s unit price of S$2.58 as of 25 October 2018, the REIT’s trailing distribution yield is 6.11%. However, if we annualize the DPU for the second quarter of FY 2018/2019, the distribution yield would be 6.03% instead.

6. The REIT’s aggregate gearing improved from 35.7% in the previous quarter to 33.2%, and is at a safe distance from the regulator-imposed gearing ceiling of 45%.

7. Weighted all-in cost of borrowing for the REIT was 3.0%, slightly higher than the 2.9% seen in the previous quarter. However, around 84.6% of the REIT’s borrowings are on fixed rates for an average term of 3.4 years, and this will mitigate the risk of rising interest rates having an adverse impact on the REIT’s financials. Ascenads REIT’s overall weighted tenure of debt rose to 3.7 years from 3.4 years in the previous quarter.

8. During the second quarter of FY 2018/2019, Ascendas REIT acquired S$437.9 million worth of properties in the UK and Australia to strengthen and diversify its portfolio. As a result, the REIT’s weighted average lease expiry (WALE) rose from 4.1 years as of 30 June 2018 to 4.3 years as of 30 September 2018.

9. Ascendas REIT has about 1,340 tenants spread out over 145 properties located in Singapore (98), Australia (35), and the UK (12).

10. The REIT’s overall portfolio occupancy rate was stable at 90.6%, but the Singapore properties saw their occupancy fall slightly to 87.1% from 88.1% in the first quarter of FY 2018/2019 due to non-renewals at two properties.

11. Positive rental reversion of 2.3% was achieved for Ascenads REIT’s multi-tenanted properties in Singapore in the reporting quarter. There were no multi-tenanted building renewals in Australia and the UK.

12. On 4 October 2018, which is in the third quarter of FY 2018/2019, Ascendas REIT completed the acquisition of 26 logistics properties in the UK for S$459.2 million.

The slight drop in Ascendas REIT’s DPU for the second quarter of FY 2018/2019 appears to be temporary, and was due to the acquisitions as mentioned above. With the second batch of acquisitions coming up to bolster the REIT’s portfolio, and with the measures taken to increase the WALE and to lower the aggregate leverage, investors can look forward to potentially higher DPU in the future as the REIT still has debt headroom for more acquisitions.

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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston does not own shares in Ascendas REIT.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing does not own shares in Ascendas REIT.