Capitaland Limited - OCBC Securities 2015-09-03: Ascott Secures New Contracts.


CapitaLand Limited: Ascott secures new contracts 

 Four new serviced residence contracts 
 Fund platform will accelerate growth 
 ART: effective destination for capital recycling 

Ascott secures four serviced residence contracts 

  • CapitaLand (CAPL) announced that its serviced residences business unit, The Ascott Ltd, has recently secured new contracts to manage over 850 units in four cities in Asia. In addition to Binh Duong (Vietnam) and Seoul (South Korea), the group will manage serviced residences for the first time in Yogyakarta (Indonesia) and Miri (Malaysia). 
  • We are overall positive that Ascott continues to show good growth in its portfolio; the group is now the world’s largest global serviced residence owner and operator with over 42k units in 94 cities across 26 countries and had achieved its global target of 40k serviced residence units well before end-2015 as scheduled. 

Will leverage on fund management to accelerate growth 

  • Management now plans for Ascott’s portfolio to grow to over 80k units globally by 2020 and, to accelerate operational growth and enhance ROE, we expect the group to leverage on its fund management platform and work alongside bluechip capital partners who will provide additional financial backing. 
  • To recap, the group had earlier this year established with Qatar Investment Authority (QIA) a 50-50 JV to set up a US$600m serviced residence fund with an initial focus on Asia Pacific and Europe. This was Ascott’s largest private equity fund to date and we understand that CAPL targets to launch six new funds with total AUM of up to S$10b by 2020. 

Ascott Residence Trust an effective destination for mature assets 

  • Ascott Residence Trust (ART) has been an effective destination for the group’s mature serviced residence assets and enables management to recycle capital expediently. In 2H15 so far, CAPL divested its interests in four serviced residences and three rental housing properties in Australia and Japan to ART for a total consideration of S$246.0m, and is expected to book a net divestment gain of S$27.7m from the sale. 
  • Maintain BUY with an unchanged fair value estimate of S$4.07.

Eli Lee | http://www.ocbcresearch.com/ OCBC Securities 2015-09-03
BUY Maintain BUY 4.07 Same 4.07