AREIT – CIMB

Ascending the ranks

• Portfolio reaches S$4.1bn, record occupancy levels of 98.7%. Revaluation gains of S$483.6m and additions from acquisitions, completed development projects and asset enhancements valued at S$290.6m expanded A-REIT’s portfolio to S$4.1bn in FY08. Record occupancy levels of 98.7% were achieved as at 31 Dec 07.

• Large supply in the pipeline; 59% pre-committed. Industrial supply in the pipeline is significant over 2008-09. However, with 59% of the pipeline already pre-committed, demand from the manufacturing sector and office users is likely to be sufficient to absorb the remaining supply. The outlook for industrial rents is positive, with rents likely to rise by up to 15% yoy in 2008.

• Upgrading DPU forecasts; target price raised to S$2.99 from S$2.60. We raise our FY08-10 DPU forecasts by 0.3-11.8% on higher yield assumptions for development projects and higher rental growth assumptions. Following this, our DDM-based target price for A-REIT (discount 6.7%) rises to S$2.99. Maintain Outperform.