This is the second part of a two-part article. Click HERE to read the first part.
Following the first part of the two-part REITs Quarterly Scorecard, we continue to review the quarterly performance of three other S-REITs that have been given a BUY rating by the research houses.
1. Mapletree Industrial Trust
Thanks to contribution from the build-to-suit (BTS) project for HP, Mapletree Industrial Trust saw its 3Q18 DPU grow by 1.8 percent year-on-year. 3Q18 was also the first quarter where Mapletree Industrial Trust recorded inaugural contribution (partial) from its 40 percent interest in Mapletree Redwood Data Centre Trust.
In two months’ time, Mapletree Industrial Trust’s $77 million 30A Kallang Place is expected to be awarded the temporary occupation permit. So far, Mapletree Industrial Trust’s pre-commitment is about 12 percent. Mapletree Industrial Trust is seeking to achieve 30 percent committed occupancy by 1H18 and 75 percent committed occupancy by end-2018.
Backed by BTS for HP, another BTS for a new data centre, full-year contribution from the US data centres and ramp-up in occupancy at 30A Kallang Place, CIMB projects 4.6 percent DPU compounded annual growth rate (CAGR) for FY17 to FY20.
Quarterly Performance Rating: B+; BUY, TP $2.16. Current share price $1.95
2. CapitaCom Trust
Following an active year with three asset disposals and an acquisition, CapitaCom Trust saw its 4Q17 DPU fell ten percent year-on-year. The decline was largely attributable to higher shares on issue, loss of income from disposal of One George Street (OGS) and Wilkie Edge. CapitaCom Trust manager has also guided that it would no longer support its DPU with capital distributions.
Despite a fairly disappointing quarter, CapitaCom Trust managed to make steady progress in improving the committed occupancy rate at Asia Square Tower 2. Asia Square Tower 2’s occupancy now stands at 90.5 percent compared to 88.7 percent at end June 2017. CapitaCom Trust has guided that it will continue to actively seek tenants for the remaining vacant space with asking rents between $11.50-12.50 psf per month.
Right now, the market has taken a negative view on CapitaCom Trust’s falling DPU. However, DBS believes that investors will appreciate the benefits of CapitaCom Trust’s asset-recycling strategy. Furthermore, CapitaCom Trust’s book remains understated with buildings such as Capital Tower and 999-year leasehold HSBC Building, priced at a discount to recent transactions of S$2,400-S$2,700 for comparable buildings. DBS believes that CapitaCom Trust deserves to be trading at a greater premium and should see its share price rally in 2018.
Quarterly Performance Rating: B-; BUY, TP $2.10. Current share price $1.73
3. Ascendas REIT
Ascendas REIT (A-REIT) grew its revenue by 4.1 percent year-on-year as it recognised contributions from recent acquisitions. One of the recent acquisitions was suburban office at 108 Wickham Street that has an initial net property income yield of 6.5 percent. A-REIT also continues to be impressive on the rent reversion front as it registered 3.1 percent positive rent reversion despite a challenging market in 3Q18.
With demand and supply dynamics turning favourable across most of Singapore’s industrial sub-segment, RHB believes that A-REIT is well-positioned to ride on the upturn with its diverse portfolio of 101 properties across the island. Moving forward, A-REIT’s focus on the Australian market will continue to support its share price, especially if the manager continues to effectively execute its capital recycling strategy.
A-REIT is recommended by RHB as its top large-cap REIT pick.
Quarterly Performance Rating: A; BUY, TP $2.90. Current share price $2.60