CapitaLand Ascendas REIT: Acquiring Two Singapore Assets for SGD 725 Million

We are positive on CapitaLand Ascendas REIT’s, or CLAR’s, acquisition of a data center and a business space property in Singapore for a total cost of SGD 725 million. These assets are individually distribution per unit, or DPU, accretive, with an estimated combined accretion of 1.36%. The transaction will be funded by a mixture of debt and equity to be raised via a SGD 500 million private placement exercise. After updating our model, we retain our fair value estimate of SGD 2.90 per share. Our DPU estimates are largely unchanged given the mild accretion. The shares are undervalued, and we like the trust’s well-diversified industrial portfolio. We expect CLAR to continue growing its DPU through lease management, asset enhancement initiatives, and capital recycling.