Ascendas Reit hits new peak despite lower dividends: Where next?

Why did Ascendas Reit, Singapore’s most valuable REIT, rally to a new share price high this week?

Ascendas Reit share price: What’s the latest?

Shares of Ascendas Real Estate Investment Trust (Ascendas Reit) (SGX: A17U) are up 2% at the start of the week, after reporting higher first-half distributable income for fiscal 2020.

Ascendas Reit shares are trading at S$3.54 each – a new all-time high – as at 11:55 SGT on Monday 27 July 2020. This surpasses the stock’s previous peak of S$3.48 achieved in March 2020.

IG's market analysis show that 'buy's form 52% of all trades on the A Reit counter so far this month.

Ascendas Reit's DPU (dividend) declines 10.8% in H1 2020

Ascendas Reit – Singapore’s largest REIT by market capitalisation at nearly S$13 billion – reported that gross revenue for the six months ended 30 June 2020 (H1 FY2020) rose by 14.6% year-on-year to S$521.2 million.

The group said the increase was mainly contributed by its US portfolio of 28 business park properties and two Singapore business park properties, which were acquired in December 2019.

However, it also noted that the stronger revenue was partially offset by the Covid-19 rent relief support provided to tenants, as well as the divestment of Wisma Gulab in January 2020 and lower occupancies of certain properties

Net property income for 2020’s first six months rose 11.2% to S$388 million, on the back of lower property tax expenses in H1 2019 due to the retrospective downward revisions in the annual value of certain properties.

Consequently, total income available for distribution for H1 FY2020 rose 3.7% from H1 FY2019 to S$263.2 million.

Despite the higher distributable income, distribution per unit (DPU) – dividends in Reit terms – declined 10.8% year-on-year to S$0.0727, after taking into consideration an enlarged number of applicable units (+16.3%) in issue mainly due to December 2019’s rights issue.

Are you looking to trade Ascendas Reit shares? Start today by opening a live or demo IG account.

Where do analysts see the A Reit share price going next?

Following Ascendas Reit's latest earnings, top investment analysts have raised their share price targets on the stock.

Jefferies increased their 12-month price targets on Ascendas Reit to S$3.80 a share from S$3.50, DBS from S$3.45 to S$4 a share, while CIMB brokers revised it to S$3.12 a share from S$3 previously.

In its note, DBS gave the stock a ‘buy’ call, citing that the company’s business parks exposure could potentially ‘benefit from the future trend towards decentralised offices as more companies adopt flexible working arrangements’.

The analysts also forecasted that Ascendas Reit could acquire as estimated S$500 million in assets by the end of fiscal 2020, which they say could will spur new growth momentum for the company.

‘We believe the next billion in deals will likely come from its Singapore business park properties in the one-north region, which its sponsor may be looking to divest and should be well received by investors,’ they added.

On the other hand, it is worth noting for investors that CIMB analysts downgraded the stock to a ‘hold’ rating from add’, as they see limited near-term upsides following its recent share price. Ascendas Reit’s share price has increased nearly 9% since mid-July.

CIMB also lowered its dividend (DPU) estimates for the company by 2.2% for FY 2020 and 2.6% for FY 2022 in light of changes in its portfolio occupancy, as well as ‘near-term drags’ in the form of S$20 million of tenant rent reliefs.

As at 12:50 SGT on 27 July, IG data show that 68% of clients hold 'short' positions on the stock and expect A Reit's share price to decline.

How to trade Ascendas Reit with IG

Are you feeling bullish or bearish on Ascendas Reit and other Singapore real estate stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  • Create a live or demo IG Trading Account, or log in to your existing account
  • Enter <Ascendas Real Estate Investment Trust> in the search bar and select the instrument
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

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