A-Reit – DMG

Scoop of the Day: A-REIT announced that it has signed an S&P to acquire two properties (DBS Asia Hub and 31 Joo Koon Building) for S$131m; and an MOU to acquire a property-under-development in Jurong for S$97.5m (expected acquisition completion in 2011/12). DBS Asia Hub is leased to DBS for 10 years while Joo Koon Building is leased to Flextronics Manufacturing for 5 years, both of which with annual rental escalation agreements. The acquisition of these two properties will grow A-REIT’s AUM by 2.8%. The acquisitions are expected to have a DPU accretion effect of 0.054¢ (+0.4%). The acquisitions will be funded entirely with net proceeds from its August 2009 placement. Maintain NEUTRAL with target price of S$2.11, pegged at 6.5% FY10 yield. We believe further retracement in stock price may present A-REIT as an attractive buying opportunity. At current share price, A-REIT offers investors an FY10 yield of 7.2%.