Can new acquisitions keep Ascendas REIT in the black in 2016?

Its growth profile is moderating.

Market volatility will not get Ascendas REIT (A-REIT) down in 2016, as analysts see the firm’s earnings getting a boost from acquisitions.

According to a report by DBS, A-REIT saw a 7% climb in average rentals during renewals in FY16. The rise is thanks mainly to the business and science park segment, as well as the logistics and distribution centres. DBS further notes that this is a good showing, considering the ongoing headwinds slamming the property market.

Meanwhile, rental reversionary outlook is likely to turn more muted, given the narrowing gap between market and passing rental levels. DBS is lowering estimates accordingly, to account for potential dilution of Exchange Collateralised Securities (ECS)—about 147,000,000 new units are expected to be issued from end-FY17, with gearing seen to drop to roughly 34%.

Going forward, acquisitions are expected to boost A-REIT’s earnings. A-REIT has bagged assets worth more than $1b in Singapore and Australia in end-FY16, and is still on the prowl for more acquisitions in its existing core markets to complement a moderating growth profile.

In addition, A-REIT has a visible pipeline of more than $1b worth of business park assets under the Sponsor’s balance sheet, which can be snapped up in the medium term.