Following the end of the financial year 2020 on 31 December 2021, Ascendas REIT (SGX:A17U) made available its financial results for the second half of the financial year (between 01 July and 31 December 2020), as well as for the full-year 2020 yesterday evening (02 February 2021.)

As a unitholder of the blue-chip REIT, I have studied its results in detail and in today’s post, you will find a summary (which I’ve compiled) containing its latest financial performance, portfolio occupancy and debt profile, and its distribution payout to unitholders, as well as my personal thoughts about the REIT’s latest set of results.

Let’s begin…

Financial Results (2H FY2019 vs. 2H FY2020, and 9M FY2019 vs. 12M FY2020)

In case you are wondering why there are only nine months worth of results for FY2019, the reason is because prior to CapitaLand Limited’s (SGX:C31) acquisition of Ascendas REIT on 30 June 2019 (you can read the news about the acquisition in full here), Ascendas REIT’s financial year ends every 31 March. Post-acquisition, CapitaLand Limited have shifted its financial year-end to every 31 December to align with the company, as well as all the REITs under it (all of them have a financial year-end every 31 December.) As such, for the financial year 2019, it only consisted of nine months worth of results (between 01 April and 31 December 2019.)

In this section, you will find the REIT’s financial results comparison on a half-year basis (i.e. 2H FY2019 vs. 2H FY2020), as well as on a full-year basis (i.e. 9M FY2019 vs. 12M FY2020):

2H FY2019 vs. 2H FY2020:

2H FY2019
(01 Jul – 31 Dec 2019)		2H FY2020
(01 Jul – 31 Dec 2020)		%
Variation
Gross Revenue
(S$’mil)		$469.4m$528.2m+12.5%
Property
Operating
Expenses
(S$’mil)		$109.2m$140.0m+28.3%
Net
Property
Income
(S$’mil)		$360.2m$388.2m+7.8%
Distributable
Income to
Unitholders
(S$’mil)		$250.7m$275.2m+9.8%

Overall, it was an improved set of results for the REIT recorded in the second half of the financial year (compared to the previous) – the 12.5% growth in its gross revenue can be attributed to its newly acquired 28 business park properties in the United States and 2 business park properties in Singapore in December 2019, along with contributions from the newly completed suburban office in 254 Wellington (in Melbourne, Australia), as well as 2 other properties acquired in San Francisco.

With the inclusion of expenses incurred from the new properties, its property operating expenses saw a 28.3% increase compared to the same time period last year.

Finally, in tandem with the increase in gross revenue, its net property income and distributable income to unitholders both recorded improvements as well.

9M FY2019 vs. 12M FY2020:

9M FY2019
(01 Apr – 31 Dec 2019)		12M FY2020
(01 Jan – 31 Dec 2020)		%
Variation
Gross Revenue
(S$’mil)		$699.1m$1,049.5m+50.1%
Property
Operating
Expenses
(S$’mil)		$161.4m$273.2m+69.3%
Net
Property
Income
(S$’mil)		$537.7m$776.2m+44.4%
Distributable
Income to
Unitholders
(S$’mil)		$375.4m$538.4m+43.4%

With only nine months worth of financial statistics in FY2019, compared to twelve months worth of financial statistics in FY2020, on a year-on-year (y-o-y) basis, it goes without saying that the latest set of results was way better.

Apart from that, the strong jump in the REIT’s gross revenue for FY2020 was also helped by the revenues from the newly acquired 28 business parks in the United States and 2 business parks in Singapore acquired in December 2019, as well as revenue contribution from the newly completed suburban office in 254 Wellington Road (in Melbourne, Australia), and 2 properties acquired in San Francisco.

Property operating expenses increased as a result of expenses incurred by the newly acquired properties.

My Thoughts: Looking at the blue-chip REIT’s results for the second half of the year 2020, compared to the same time period last year (i.e. for the second half of the year 2019), despite the former being in the midst of the Covid-19 pandemic, and the latter before the outbreak, I am happy to note that it still managed to record a stronger set of results (even though the newly acquired properties played a role in the improved set of results.)

Portfolio Occupancy Profile (Q3 FY2020 vs. Q4 FY2020)

In this section, let us take a look at Ascendas REIT’s portfolio occupancy profile recorded for the current quarter review (i.e. Q4 FY2020 ended 31 December 2020) compared against its portfolio occupancy profile recorded in the previous quarter three months ago (i.e. Q3 FY2020 ended 30 September 2020) to find out if it has improved or deteriorated 3 months on:

Q3 FY2020Q4 FY2020
Portfolio Occupancy
(%)		91.9%91.7%
Rental Reversion
(%)		-2.3%+2.5%
Portfolio WALE (by
Gross Revenue – in
Years)		3.9%4.1%

My Thoughts: Apart from a slight drop in its overall portfolio occupancy (where its Singapore properties’ occupancy rate went down slightly from 88.8% in Q3 FY2020 to 88.4% in Q4 FY2020, and its Australia properties’ occupancy rate edging down from 97.5% in Q3 FY2020 to 97.4% in Q4 FY2020), personally, I am happy to note that the REIT have managed to record a positive rental reversion for renewed leases in the quarter under review; its overall portfolio weighted average lease expiry (WALE) also recorded improvements as well.

In terms of its lease expiry in the coming years ahead, 16.3% of the leases are due for renewal in FY2021, 19.9% in FY2022, 21.5% in FY2023, and the remainder in FY2024 and beyond.

Debt Profile (Q3 FY2020 vs. Q4 FY2020)

Next, let us take a look at the REIT’s debt profile. Just like when I looked at its portfolio occupancy profile in the previous section, I will be comparing the REIT’s debt profile for the current quarter under review (i.e. Q4 FY2020 ended 31 December 2020) against that recorded 3 months ago (i.e. Q3 FY2020 ended 30 September 2020):

Q3 FY2020Q4 FY2020
Aggregate Leverage
(%)		34.9%32.8%
Interest Coverage
Ratio (times)		4.3x4.3x
Average Term to
Debt Maturity (%)		3.7%3.7%
Average Cost of
Debt (%)		2.8%2.7%

My Thoughts: Compared to the quarter three months ago, the REIT’s debt profile is more or less the same. The only noticeable difference was its 2.1 percentage point improvements in its aggregate leverage – at this percentage (of 32.8%), there remains plenty of debt headroom for the REIT to make further acquisition before it reaches the regulatory limit of 50.0%.

Distribution Per Unit

For the current quarter under review, the amount of distributions declared was 7.418 cents/unit – this includes a payout of 5.74 cents/unit declared for the period between 01 July and 18 November 2020, which was paid out on 11 December 2020, and 1.678 cents/unit declared for the period between 19 November and 31 December 2020, and the payout date is as follows:

Ex-Dividend: 09 February 2021
Record Date: 10 February 2021
Payout Date: 09 March 2021

For the full-year, its distribution fell by 6.1% from 15.638 cents/unit (in FY2019) to 14.688 cents/unit (in FY2020) due to an increase in unit base as a result of a rights issue (in December 2019), private placement (in November 2020), and preferential offering (in December 2020) held by the REIT, as well as the negative impact brought about by the Covid-19 pandemic.

In Conclusion

Personally, I felt that the blue-chip REIT’s latest set of results was a resilient one (I am particularly impressed with the improvements recorded in the second half of the financial year compared to the same time period last year.) In terms of its portfolio occupancy and debt profile, both of them continued to remain strong as well.

With that, I have come to the end of my summary of Ascendas REIT’s latest set of results. I hope you have found the contents above useful. Finally, please note that this post is by no means a buy or sell call for the REIT’s units. You should always do your own due diligence before you make any investment decisions.

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Disclaimer: At the time of writing, I am a unitholder of Ascendas REIT.

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