With the exception of RHB Group Research who has maintained its “neutral” recommendation on Ascendas REIT (A-REIT), CGS-CIMB Research, DBS Group Research, Maybank Kim Eng, OCBC Investment Research (OIR) and PhillipCapital have maintained their “add” or “buy” calls on the REIT following its FY2020 results released on Feb 2.

Despite his “neutral” call, RHB analyst Vijay Natarajan has upped A-REIT’s target price to $3.15 from $3 as he believes it remains one of the “most defensive industrial REITs” with a well-diversified portfolio across mainly business parks and logistics.

“Share price has underperformed over the last three months mainly due to an overhang from large equity fund raising and pending acquisition,” he says.

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Despite the positives, the valuation is not compelling, with the stock trading at 1.4 times price-to-book value (P/BV) and a dividend yield of 5%.

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For FY2021, Natarajan expects a 6% y-o-y increase in distribution per unit (DPU) due to the absence of rental rebates and accretive acquisition of $1.5 billion worth of assets, as well as the acquisition of $1 billion worth of European datacentres.

“Overall portfolio value (same-store basis) was stable as cap rates remained largely stable,” he notes.

That said, Natarajan has lowered his DPU estimates for FY2021-FY2022 by 1-4% to factor in a slight delay of acquisition/asset redevelopment completion.

“Our cost on equity (COE) is also lowered by 50 basis points to factor in lower cost of capital,” he adds.

CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei view the REIT’s portfolio as “diversified” and “resilient” with its stable portfolio occupancy and positive portfolio rental reversion, as well as strong inorganic growth visibility.

Lock and Eing have also upped their target price estimate to $3.25 from $3.20 previously, though they have decreased DPU estimates for FY2021 and FY2022 by 2.53% and 2.07% respectively. The lower DPU forecast is to factor in the effect of A-REIT’s equity fund raising exercise and adjustments for the latest forward     portfolio lease expiry profile.

A-REIT’s 2HFY2020 DPU and FY2020 DPU of 7.418 cents and 14.688 cents respectively came in within Lock and Eing’s expectations at 49.3% and 97.7% of their FY2020 forecast.

DBS Group Research analysts Dale Lai and Derek Tan view the REIT’s valuations as “attractive” given its similar DPU compound annual growth rate (CAGR) of 7.7% over FY2020-FY2023 compared to its other large-cap peers, which are trading at 5.2% forward yield and 1.4 times price-net asset value (P/NAV).

While its FY2020 DPU came in slightly below their expectations due to the difference in timing in fund raising and the completion of acquisitions, Lai and Tan see that A-REIT has multiple structural tailwinds in place, which will drive earnings and capital values higher in the long term.

“We continue to like A-REIT for its diversified portfolio that has proven to be resilient amidst the Covid-19 pandemic. Despite setting aside more than $22 million in rental rebates and deferments to assist tenants, A-REIT was still able to report healthy earnings,” they say.

The analysts have thus included the assumption of the acquisition of the European data centre portfolio into their valuations, and have projected the REIT’s FY2021 DPU to grow by about 8% with the completion of the acquisition as well as the contributions from earlier acquisitions.

Tan and Lai have maintained their target price at $4 as they assume a weighted average cost of capital (WACC) of 5.9% and acquisitions that’ll take place in FY2021.

SEE: Ascendas REIT declares 0.9% drop in 2H20 DPU to 7.418 cents, 6.1% lower FY2020 DPU of 14.688 cents

Maybank’s Chua Su Tye has also maintained his target price of $4.

“Management has stayed with the rental reversion guidance into FY2021. Fundamentals remain strong, backed by its scale, rising DPU visibility, growth levers from a strong balance sheet, and further overseas diversification,” he writes in a Feb 3 report.

As the REIT’s management has guided for a low single-digit positive reversion for 2021, Chua remains optimistic on its rental growth, which is likely to be led by its business parks, suburban office and logistics space.

“While the European data centre deal remains on track (at +2-2.5% DPU accretion), we believe A-REIT could revisit its sponsor’s $1 billion Singapore pipeline at the Science Park in the near to medium term,” he says.

OCBC’s research team has lowered its fair value estimate on A-REIT to $3.89 from $3.92 as the REIT’s FY2020 results came in below its expectations.

However, it views the REIT’s initiatives to broker more acquisitions following FY2020 as a plus, as it will help “fuel A-REIT’s continued inorganic growth ahead”.

“We incorporate A-REIT’s latest results and acquisitions in our model, update our FX assumptions (stronger AUD but weaker USD relative to the SGD) and roll forward our valuations,” write the team.

In addition to her “buy” call, PhillipCapital analyst Natalie Ong has upped her target price estimate on the counter to $3.73 from $3.63 previously.

She has, however, lowered her DPU estimates for FY2021 and FY2022 by 8.8% and 0.2% respectively after factoring in the REIT’s recent acquisitions, as well as an enlarged share base.

The higher target price is due to higher later-period DPUs and terminal value, she says.

While A-REIT’s FY2020 DPU came in lower than her expectations at 91% of their adjusted DPU estimates, Ong says she continues to favour the REIT due to its “scale and diversification”.

“Stock catalysts are expected from acquisitions and redevelopment. We forecast DPU growth of 9.6% for FY2021 as acquisitions and redevelopment/AEI start contributing,” she says.

As at 4.16pm, units in A-REIT are trading 7 cents higher or 2.3% up at $3.17, with a P/NAV of 1.4 times according to DBS's estimates.