Brokers' take

ASCENDAS REIT | OVERWEIGHT

TARGET PRICE: $2.85

SEPT 26 CLOSE: $2.68

JPMorgan, Sept 26

Ascendas Reit (A-Reit) has acquired its first CBD-fringe office in Brisbane's Fortitude Valley with the purchase of 100, Wickham Street for A$83.8 million (S$90 million).

The property is fully occupied at a weighted average lease expiry of 4.8 years, which should shield it from potential leasing risks from subdued demand and high-teens vacancy rate in Brisbane's CBD-fringe office market.

Initial acquisition yield of 7.6 per cent and purchase price of A$6,382 per sq m appear competitive and are in the middle of the 6.25 per cent to 9.25 per cent and A$8,247 to A$11,664 psm range for secondary CBD-fringe offices in the city.

Most importantly, the acquisition will add 0.3 per cent to DPU and a higher 0.8 per cent if it is fully funded by debt.

With adjusted gearing still at a low 34.5 per cent, we expect this maiden purchase to kick-start A-Reit's acquisition activity over the next three to six months. It has historically announced S$500 million of acquisitions a year.

The stock remains one of our top S-Reit picks in view of its 64 per cent exposure to higher value-added industrial space, earnings upside from occupancy improvement and sizeable sponsor pipeline.

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VENTURE CORPORATION | BUY

TARGET PRICE: $19.70

SEPT 26 CLOSE: $17.21

RHB Research, Sept 26

Venture Corp's profit-before- tax margin in Q2 2017 improved to 8.3 per cent from 7.6 per cent in Q1 2017. Going forward, we believe that its margins may likely continue to improve in the remaining quarters of FY17.

The group has been forking out dividends per share (DPS) of 50 cents for the past few years despite the recovery in its results.

With the superb H1 2017, we think that dividends may likely be increased to reward shareholders, if its stellar performance is maintained.

As such, we expect DPS for FY17 to be raised by 20 per cent to 60 cents, reflecting a 3.5 per cent full-year dividend yield.

Medical, life sciences, and test and measurement units are still the key growth pillars. We remain positive on these divisions and expect this trend to continue for the rest of the year. Demand growth is likely to be slower due to the higher base effect.

With the continued value creation, coupled with new major product launches ahead in Q4 2017, we expect this positive momentum to continue into Q3 2017.

As a result, we lift our FY17-18 net profit forecast by 10 per cent.

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