Ascendas REIT falls; Daiwa says 4Q earnings below forecast, rental reversions turn negative

Singapore 50 dollar bill

Shares of Ascendas REIT fell on Tuesday after reporting results, with Daiwa saying earnings were below expectations.

The unit was down 1.11 percent at S$2.68 at 10:46 A.M. SGT on Tuesday.

For its fiscal fourth quarter, the REIT reported a distribution per unit (DPU) of 3.910 Singapore cents, up 1.5 percent on-year and that net property income rose 2.5 percent on-year to S$157.87 million.

Daiwa said DPU was 3 percent below its forecast on weaker operating performance, pointing to the 108 Wickam Street office acquisition in Brisbane, Australia, in December and the divestment of the 84 Genting Lane property in Singapore in January.

It also noted that fiscal fourth quarter rental reversions were negative 6.8 percent, hurt by a single lease renewal which was at negative 18.8 percent in the high-specification industrial segment and management said was 40 percent of the space renewed in the period.

Daiwa cut its fiscal 2019-20 DPU forecasts by 1-1.5 percent and cut its target price to S$2.46 from S$2.50.

It kept an Underperform call, saying the unit is overvalued compared with its peers and amid a “sluggish” recovery in Singapore’s industrial property sector.

“We are still the only broker on Bloomberg with a negative rating for the stock, as we do not believe the sector recovery will be strong
and that the risk for overpaying for assets overseas is high considering that cap rates have probably narrowed significantly in AREIT’s target markets,” Daiwa said.

The unit has traded in a tight range of S$2.68 to S$2.71, suggesting support and resistance. DZHI data indicate resistance at around S$2.725, followed by S$2.735, while support is at S$2.675. The March 26 low of S$2.57 may also act as a lower bound.