Home » , » ESR-REIT - ESR-REIT’s 2Q18 DPU rose 4.7% y-o-y, mainly on acquisitions and divestment gains

ESR-REIT - ESR-REIT’s 2Q18 DPU rose 4.7% y-o-y, mainly on acquisitions and divestment gains

Shared By Stock Fanatic on Tuesday, August 14, 2018 | 14.8.18

• 2Q18 DPU of 1.001 Scts broadly in line

• Rent outlook to improve in FY19F as supply tapers

• Capacity for future dividends remains supported amid AEI initiative given cash hoard of c.S$75m from past divestments

Maintain BUY with TP of S$0.63; we have yet to factor in the M&A with Viva. Read More

What’s New
(+) 2Q18 DPU rose 4.7% y-o-y to 1.001 Scts, mainly on acquisitions and divestment gain. ESR-REIT registered a strong 17.6% y-o-y growth in gross revenue to S$32.5m in 2Q18, mainly due to the acquisition of 8 Tuas South Lane and 7000 AMK in December 2017 and rent escalations from several properties, but partly offset by lower contributions from 16 Tai Seng, 21B Senoko Loop and 3 Pioneer Sector 3 post lease conversion to a multi-tenanted structure, expiries, non-renewal of leases at three properties and four property divestments of non-core assets since 2Q17.

Property expenses grew by a lesser quantum, resulting in an NPI boost of c.22% y-o-y to S$23.4m. EBIT interest coverage improved from 3.45x (2Q17) and 3.41x (1Q18) to 3.51x (2Q18). Given similar working capital profiles, OCF also maintained relatively stable y-o-y at S$19.7m (2Q18) vs S$20.3m (2Q17).

Including the partial realisation (S$1.8m of S$6.3m) of gains from sale of two plots to the Singapore Land Authority in 2012-2013, 2Q18 distributable income rose 26.4% y-o-y to S$15.8m – resulting in a higher DPU of 1.001 Scts (+4.7% y-o-y). Given the enlarged share unit base, 1H18 DPU fell 5.7% y-o-y to 1.848 Scts but on an adjusted basis (taking into account the weighted average units in 1Q18), DPU have would have been closer to 2.009 Scts (+2.5% vs 1.96 Scts in 1H17).

Technical Analysis
Daily Chart
Overall, 1H18 DPU formed 46.4% of our FY18F forecasts, which was broadly in line. For 2H18, we believe that contributions from newly acquired assets 8TSL and 7000AMK (added in 3Q17) and addition of Tampines LogisPark (poised for completion at end-3Q18/early 4Q18) should provide adequate buffer from negative rental reversions and/or dips in occupancy and drive earnings growth.

Source : DBS Group Research
(Read Report)

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Posted on Tuesday, August 14, 2018 | 14.8.18
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