Ascendas REIT DPU to grow by just 0.9% next year

Its valuations are no longer attractive.

There is no doubt that Ascendas REIT has had a good run, with its share price appreciating 19.8% YTD, strongly outperforming the STI, and FTSE ST REIT Index and making it the second best performing S-REIT.

However, according to OCBC Investment Research, its valuations are no longer attractive at this juncture, with a forecasted FY18 distribution yield of 5.8%.

"Our downgrade is also premised on our projections for relatively modest DPU growth of 0.9% in FY18, partly due to a full-year effect of an enlarged unit base arising from the conversion of all its Exchangeable Collateralised Securities into units in FY17," the brokerage firm said, noting that investors can lock in some gains.

Ascendas REIT's good run is driven by its significant exposure to the business park and science park segments in Singapore, which is facing more positive demand and supply dynamics relative to the general industrial market, coupled with expectations of further inorganic growth given its healthy aggregate leverage ratio of 33.8%.
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