OCBC Investment Research lowered its target price on shares of Ascendas Real Estate Investment Trust, which owns industrial properties, to $2.22 from $2.31 but kept its ‘buy’ rating.
Units of Ascendas REIT were down 1% at $2.00, while the FT ST Mid Cap Index was nearly flat. The stock has risen around 9% so far this year, matching the gain in the index.
OCBC said it factored in an enlarged unit base following Ascendas REIT’s unit placement and an expected loss in income after the firm sold one of its properties, partially balanced out by lower interest expenses from fewer borrowings.
Despite market concerns that industrial rents may ease slightly in 2012, OCBC said it saw upside potential for Ascendas REIT’s rents that are due for renewal. This should support the estimated distribution per unit yield of 6.9% for the firm’s 2013 fiscal year, which OCBC said is attractive.
OCBC added that Ascendas REIT’s stronger financial position will likely give it a greater ability to tap on growth opportunities, as well as secure borrowings at potentially more competitive terms to fund its committed investments.
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