ASCOTT RESIDENCE TRUST
A68U.SI
Ascott Residence Trust - 3Q17: Lacks A Little Zing
- Ascott Residence Trust's 9M17 DPU of 5.04 Scts (-16.6% yoy) was broadly in line with our expectation at 71% of our full-year forecast.
- We expect a stronger 4Q17, with contributions from Ascott Orchard Singapore (AOS), which was acquired on 10 Oct 2017.
- 3Q17 lacks a little zing, with RevPAU (on a same-store basis) decreasing 1% yoy.
- Revenue came only from acquisitions, while organic performance was a mixed bag.
- Noticeably, weakness came from Japan, Singapore and the US.
- Due to a lack of earnings catalysts, we maintain Hold on ART with a higher target price as we roll forward our DDM-based valuations.
3Q17: lacks a little zing
- Ascott Residence Trust's 3Q17 DPU of 1.69 Sts (-25.9% yoy) was at 24% of our FY17F. The headline -25.9% yoy drop was due to a one-off realised exchange gain in 3Q16 and rights issue completed in Apr 2017. Adjusting for this, 3Q17 DPU would have been 2.18 Scts (+1% yoy).
- 3Q17 RevPAU improved 1% yoy to S$146.
- On a same-store basis, RevPAU would have decreased 1% yoy. Hence, revenue growth came mainly from acquisitions, with organic performance a mixed bag and showing little momentum.
China boosted by AEI; US aided by acquisition
- As at 30 Sep 2017, Ascott Residence Trust (ART)’s four largest markets in terms of AUM are China (16.1% of AUM), Japan (13.5%), USA (12.5%) and Singapore (11.8%).
- In Sing dollars, 3Q17 gross profit from China improved 27% yoy. RevPAU (in RMB) climbed 4% yoy due to higher revenue from refurbished Somerset Xu Hui Shanghai. Meanwhile, gross profit from the US (in S$) improved 5% yoy due to DoubleTree by Hilton Hotel NY (acquired on 16 Aug 17).
- On a same-store basis, RevPAR (in US$) decreased by 8% yoy due to new supply.
Japan hurt from keen competition, Singapore still very slow
- In Sing dollars, 3Q17 gross profit from Japan fell 27% yoy due to depreciation of the JPY and competition from new supply (resulting in a lower ADR).
- On a same-store basis, RevPAU (in JPY) fell 7% yoy. Gross profit from Singapore fell 13% yoy. RevPAU fell 10% yoy due to subdued corporate demand and a long-stay project group which commanded lower average daily rates.
Gearing expected to increase to 36%
- As at end-3Q17, gearing stood at 31.9% (2Q17: 32.4%).
- Post the completion of Ascott Orchard Singapore and divestment of Citadines Biyun Shanghai and Citadines Gaoxin Xi'an, gearing is expected to increase to 36%. All-in interest costs were maintained qoq at 2.4% p.a.
Maintain Hold with a higher target price
- We increase our FY17F-19F DPU by 0.2% as we factor in higher contributions from China, partially offset by lower contributions from Singapore.
- Due to a lack of earnings catalysts, we maintain Hold on ART with a higher target price as we roll forward our DDM valuation. ART is trading at 6% FY18F yield and 0.98x current P/BV.
- Upside/downside risks hinge on macro growth and acquisitions.
YEO Zhi Bin
CIMB Research
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LOCK Mun Yee
CIMB Research
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http://research.itradecimb.com/
2017-10-25
CIMB Research
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