4Q09 results were in line with estimates. For the quarter, Ascendas REIT (A-REIT) reported a DPU of 3.2 Scts and 15.2 Scts for the FY09. In terms of valuation, A-REIT is starting to look rich at 0.9x P/BV vis-à-vis peers at 0.5x P/BV. Current price, which has risen 32% since our last report, has only 6% upside to our TP of S$1.56. We downgrade the stock to a HOLD. A-REIT currently offers a FY10-11 DPU yield of 8%.

Results in line. A-REIT reported 4Q09 results in line with our expectations. Gross revenues and net property income grew 24% and 25% to S$104.3 and S$80.1 respectively. This was largely due to a stable source of income stream from its portfolio, coupled with contribution from new additions in its portfolio. Distributable income grew by a smaller 6% to S$51.8m, largely due to management taking performance fees in cash instead of units. DPU for 4Q09 was 3.2 cts, -12% lower yoy due to a larger unit base. For FY09, A-REIT delivered a DPU of 15.2 Scts. Looking ahead, management has indicated to maintain a payout at 100%.

Gearing was at 35% as at March’09 but is estimated to rise to c38% with the completion of its development projects. Interest cover is expected to remain healthy at 4.2x.

Occupancy levels remained healthy. As of 4Q09, portfolio occupancy remains healthy at 98% (Multi-tenanted buildings 95%, Sales and Lease back 100%), which has remained stable for most of FY09. Looking ahead, we estimate vacancy levels at its multi-tenanted buildings portfolio to increase to 15%.

Downgrade to HOLD, TP S$1.56, based on DCF. We downgrade A-REIT to a HOLD, largely on valuation grounds given the limited price upside to our target price. A-REIT is also trading at a premium to peers 0.9x P/BV vs 0.5x P/BV, offers a FY10-11F yields of 8%.