Ascott Residence Trust | Sell
Target price: $1.00
July 25 close: $1.14
Broker: OCBC Investment Research, July 25
Ascott Residence Trust's (ART) second-quarter (Q2) revenue rose 6 per cent year on year to $130.5 million, while DPU (distribution per unit) was flat at 1.84 cents or 27 per cent of our initial full-year forecast. DPU for the first half of the year came up to 47 per cent of our full-year forecasts, which is within expectations.
ART remains the largest hospitality S-Reit by market cap, with a diversified base of quality assets in gateway cities. Operationally, we like ART for the strong brand recognition of its assets, and the resilient nature of its portfolio. Gearing also stands at a reasonable rate of 35.7 per cent as at June 30, with about 84 per cent of ART's total borrowings on fixed interest rates.
However, we remain cautious in the light of the rising interest rate environment, given that investors may demand higher yield from bond-like assets. We also see muted DPU growth ahead, in the low single-digits for FY2019.
Frasers Centrepoint Trust | Add
Target price: $2.41
July 25 close: $2.22
Broker: CGS-CIMB, July 24
Frasers Centrepoint Trust's third-quarter performance was in line, with gross revenue, up 10.9 per cent year on year to $48.3 million, thanks to higher portfolio occupancy and positive rental reversions. Distribution income of $28.3 million (DPU: 3.1 cents) was 2.2 per cent higher year on year and represented 100 per cent payout ratio. Top-line growth was largely due to higher contributions from Northpoint North Wing (+35.9 per cent to $13 million), Causeway Point (+3.8 per cent to $21.8 million) and Changi City Point (+15.8 per cent to $6.5 million).
The trust registered a solid +5 per cent rental reversion this quarter on the renewal of 4 per cent of its net lettable area, mainly driven by better rental rates at Yew Tee Point and Changi City Point.
We expect the larger malls to continue driving growth with higher footfall, occupancy rate and rental reversions. The trust is also well positioned for inorganic growth with a healthy balance sheet.
Suntec Reit | Add
Target price: $2.08
July 26 close: $1.86
Broker: CGS-CIMB, July 25
Suntec Reit reported a 3.7 per cent rise in Q2 revenue to $90.5 million from last year, thanks to higher contributions from Suntec Convention Singapore and 177 Pacific Highway in Australia, while distributable income stayed flat year on year.
However, distribution per unit of 2.47 cents was 0.8 per cent lower year on year due to lower net property income margin, higher interest cost and an expansion in the unit base from the conversion of bonds earlier this year.
Suntec Reit's improved demand for office space is in tandem with the office market recovery. Rising tenant sales and shopper traffic also have boosted retail performance. The Reit achieved a retail portfolio committed occupancy of 98.6 per cent in Q2, and signed 179,000 sq ft of leases. Retail rental revenue rose 2.4 per cent year on year to $30.3 million.
Looking ahead, Suntec Reit plans to enhance the value proposition of Suntec office through an upgrading exercise. We adjust down our FY19-20F DPU estimates marginally post-results to factor in the higher sinking fund contributions at Suntec City. Accordingly, our target price is lowered slightly.
Suntec Reit's retail leasing operations are recovering and its office rental income should continue to benefit from the rising office rents in Singapore. Downside risk includes faster-than-expected rise in interest rates.
Mapletree Industrial Trust | Neutral
Target price: $2.09
July 26 close: $2.02
Broker: Phillip Capital, July 25
Gross revenue and DPU for Mapletree Industrial Trust (MIT) were within expectations, meeting 25.6 per cent and 24.8 per cent respectively of our FY2019 full-year estimate.
A gearing of 35 per cent remains relatively low, compared to the Industrial Reits sub-sector average of 37.4 per cent as at March 31. Outlook for MIT is stable. At the industrial sector level, there are headwinds from vacancies and negative reversions. However, contributions from inorganic sources are adequate to offset organic weakness for FY2019.