Ascott Reit – Daiwa
ASCOTT REITS, daiwa downgraded to UNDERPERFORM from Hold with target price $2.47
– We have downgraded our rating for Ascendas Real Estate Investment Trust (AREIT) to 4 (Underperform) from 3 (Hold). For AREIT, we believe its best days for acquisitions are behind, so it is not surprising that its manager has not made an acquisition announcement so far in FY08 (year-end March). Nonetheless, there is a slight risk that it might not meet our acquisition (including development projects) forecast of S$400m for FY08. The mild disappointment is that the announcement of development projects (purportedly to overcome the increasing competition for acquisitions and leverage on AREIT’s asset size and manager’s skill set) appears to have quieted also.
– Aside from liquidity, we do not see many reasons for investors to prefer AREIT over the other industrial Singapore-listed realestate investment trusts (S-REITs). Based on our forecasts, we expect AREIT to provide a 12-month forward yield of 4.9% and a DPU CAGR of 6.7% over the next three years. This is unattractive, in our opinion, relative to our forecasts of a 5.4% forward yield and three-year DPU CAGR of 19.9% for Mapletree Logistics Trust (MLT SP, S$1.36, 2).
– We have made no changes to our DPU forecasts or our six-month target price of S$2.47, based on our RNG valuation methodology.