“Portfolio occupancy of 89.4% is expected to move to above 95% through lease-up of spaces in Japan. With a long WALE of 5.8 years, built-in rental escalations of 2.8% and occupancy uplift of 1.7%, the portfolio offers visible organic DPU growth of 4.8% for FY2027,” notes the analyst in his June 1 note.
At the same time, the REIT’s sponsor and Boustead Projects have provided a growth pipeline worth US$5.9 billion, alongside other co-development opportunities. For one, the REIT manager has embarked on developing a logistics asset in Japan adjacent to an existing asset with a yield‑on‑cost of 4.8%, says Guha.
Apart from the development pipelines, the REIT’s recent announcement that it has locked in electricity tariffs for three years is a positive sign as it can help mitigate volatility in operating costs.
Based on the IPO projections and progressive stabilisation of upcoming asset enhancements, Guha predicts that UI Boustead REIT’s distribution per unit (DPU) could come in at 6.8 cents for FY2027 and 7.1 cents for FY2028.
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As such, he is initiating coverage on UI Boustead REIT with a “buy” recommendation and DDM-based target price of $1.03.
“We believe the strategically located assets within established industrial clusters in Singapore and Japan, catering to reputable tenants in the high-tech and innovation-driven sectors will augur well for income resilience and organic growth,” says Guha.
Furthermore, the sponsor’s expertise as a Pan-Asian industrial real estate platform provides access to inorganic growth.
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And of course, its valuations are deemed “attractive” compared to peers with 8.3% FY2027 yield and 0.93 times P/B ratio, he adds.
As at 10.35am, Units in UI Boustead REIT are trading 0.5 cents higher, or 0.63% up at 80 cents.
