{"id":323578,"date":"2023-06-08T00:46:06","date_gmt":"2023-06-07T16:46:06","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=323578"},"modified":"2023-06-08T00:46:08","modified_gmt":"2023-06-07T16:46:08","slug":"stock-in-focus-areit-inc-areit-8-june-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-areit-inc-areit-8-june-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: AREIT Inc. (AREIT) – 8 June 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>AREIT<\/td><\/tr>
Company Name<\/strong><\/td>AREIT Inc.<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>8 June 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 42.10<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

We have a Target Price of Php42.10 per share based on the dividend discount model (DDM) based on AREIT’s 5-year dividend per share CAGR of 7% driven by asset infusions, 3-5% rental escalations, and sustained occupancy rate of 97%. Our Target Price offers a share price upside of 23.6% and a 2023 and 2024 dividend yield of 6.1% and 6.4%, respectively.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

AREIT and ALI property-for-share swap<\/strong><\/p>\n\n\n\n

AREIT Inc. and its sponsor Ayala Land, Inc. (ALI) executed the Php22.5 billion property-for-share swap. ALI will infuse 190k sqms of mall and office space to AREIT. In turn, AREIT will issue 607.6 million primary shares to ALI.<\/p>\n\n\n\n

What properties will AREIT acquire? Under the agreement, ALI will transfer One Ayala Avenue East, West BPO Towers, Glorietta 1 and 2 mall wings and BPO buildings at Ayala Center, alongside MarQuee mall, all of which have an aggregate gross leasable area (GLA) of 190k sqms, occupancy rate of 99%, and weighted average lease expiry of 14.5 years.<\/p>\n\n\n\n

The transaction will effectively increase AREIT\u2019s GLA by 28% to 863k sqms, and raise its deposited property value by 35% to Php86.5bn. Assuming a 7% cap rate (based on regional average), we estimate the infused properties to contribute Php0.8bn\/Php1.6bn (+18%\/+36%), to AREIT\u2019s FY23F\/FY24F distributable income.<\/p>\n\n\n\n

Meanwhile, with the share issuance, AREIT\u2019s shares outstanding would also rise by 35% to 2.4mn shares. This would bring the deal to be net dividend per share (DPS) accretive by 1% in FY23-FY24.<\/p>\n\n\n\n

We note, however, that better-than-expected performance of AREIT\u2019s mall properties may provide further upside to AREIT\u2019s dividends (assuming tenant sales outperforms due to strong consumption recovery). To recall, foot traffic and tenant sales of ALI\u2019s mall properties already reached 100% and 92% of pre-COVID levels respectively.<\/p>\n\n\n\n

Forecast changes<\/strong><\/p>\n\n\n\n

We tweaked our FY23F\/FY24F DPS estimates by -10%\/-9% as we impute a more conservative dividend payout ratio (90% vs. 95% previously) and as we incorporate the impact of the Php22.5bn asset-for-share swap (+1% DPS accretion). Our new forecast reflects a FY23\/FY24 DPS growth of 5%\/4%.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>