A-Reit – Kim Eng

Ascendas REIT – 2Q10 results review
Previous day closing price: $1.94
Recommendation: Hold (downgraded from Buy)
Target price: $2.02 (increased from $1.99)

In line with expectations
A-REIT’s NPI in 2Q10 grew 11.7% yoy, underpinned by positive rental reversions and lower
operating expenses. Distributable income grew 15.4% yoy to $61.6m while DPU declined 13.2%
yoy to 3.48 cts due to the dilutive impact of the equity cash calls this year. Of that, 1.94 cts has
been paid on 23 Sep, leaving 1.54 cts to be paid on 26 Nov (ex-date 27 Oct).

Resilient portfolio
The occupancy rate for its multi-tenanted portfolio fell slightly to 93.3% in 2Q10 from 94.0% in
1Q10. However, with more than half of the leases expiring in FY10 being renewed, we expect
portfolio occupancy to remain stable. A-REIT’s overall portfolio occupancy rate of 96.8% is still
above the market’s average of between 88-91%.

Positive rental reversion for business park space
Positive rental reversions for its business space moderated in 2Q10 (+23% vs +33% in 1Q10). We expect modest rental reversions in 2H10. Conversely, rentals for Light-industrial and Logistics spaces may face slight pressures. Nonetheless, annual rental escalations for some ofits long-term leases and contribution from the two completed development projects could mitigate any decline in rentals.

Little excitement on acquisitions front in FY10

Fast approaching our target price