Ascendas REIT's net property income climbed 5.2% to S$100.1m

Its portfolio assets remained healthy.

According to OCBC Investment Research, Ascendas REIT (A-REIT) reported its 4QFY13 results last evening. NPI came in at  S$100.1m, up 5.2% YoY (-4.3% QoQ).

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This is in line with our NPI projection of S$100.7m. However, distributable income of S$68.8m falls short of our expectation of S$77.4m, dropping 5.5% YoY (-15.1% QoQ) amid higher operating expenses and a performance fee of S$6.9m recognized in the quarter.

As a result, DPU declined 12.6% YoY (-15.5% QoQ) to 3.06 S cents, dragged further by an enlarged unit base. For FY13, DPU totalled 13.74 S cents, up 1.3%. This is somewhat below our and street’s full-year estimates of 14.0-14.2 S cents. Excluding performance fee, we note that DPU would have grown 3.6% to 14.05 S cents, closer to our projections. 

Portfolio assets remained healthy
Despite the softer 4Q performance, A-REIT  continued to exhibit strength in its portfolio assets. Positive rental reversions were registered across all its property types, with a weighted average of 14.5% increase over the previous contracted rates.

Multi-tenanted building and portfolio occupancy rates also
held steady at 89.6% and 94.0% respectively, unchanged from that seen in 3Q. In addition, weighted average lease to expiry remained firm at 3.7 years (3.8 years in prior quarter). 

Further growth opportunities
Looking ahead, A-REIT expects the positive rental reversions to persist, albeit at a slower pace, as the market rents are still 9-35% higher than the passing rents for the area due for renewal in FY14.

Management also pointed out there is ~10% vacancy in the multi-tenanted portion of its portfolio, which may provide upside if these spaces are leased out. During the quarter, A-REIT also announced the development of DBS Asia Hub Phase 2 for S$21.8m and two new asset enhancement projects totalling S$14.0m. 

These initiatives, together with the announced investments, are likely to maintain its stable performance in FY14, in our view. We incorporate the results into our forecasts and roll over our valuation to FY14.