Ascott Residence Trust - CIMB Research 2016-04-15: Propelled by acquisitions

Ascott Residence Trust - CIMB Research 2016-04-15: Propelled by acquisitions ASCOTT RESIDENCE TRUST A68U.SI 

Ascott Residence Trust - Propelled by acquisitions 

  • 1Q16 DPU of 1.75 Scts (-1% yoy) was largely in line with our expectation and consensus at 22% of our full-year forecast. 
  • Strong operating performance in several markets drove portfolio RevPAU up by 10% yoy to S$125. Advanced distribution of 1.585 Scts declared. 
  • We believe that ART is on track to achieve its target AUM of S$6bn by 2017. 
  • Maintain Hold, reduce target price to S$1.14. ART remains our preferred pick in the hospitality sub-segment. 

1Q16 results: propelled by acquisitions 

  • Propelled by the S$609m of acquisitions from 2015 (six properties across Australia, Japan and the US as well as remaining stakes in two existing properties in Japan), ART’s 1Q16 revenue expanded 17% yoy to S$105.5m. 
  • Strong operating performance in several markets drove portfolio RevPAU by 10% yoy to S$125. Excluding the acquisitions, RevPAU increased by 1% yoy. Gross profits increased by 13% (+4% yoy on a same-store basis). 
  • Distributable income notched up 1% yoy to S$27.3m. 

Strong operating performance from several markets 

  • In local currencies, China’s RevPAU improved 6% yoy as it saw more bookings from project groups, mainly in first-tier cities. 
  • Japan’s RevPAU rose 4% yoy due to stronger demand from corporate and leisure travellers. 
  • Singapore’s RevPAU was fairly stable (+1% yoy). 
  • Australia’s RevPAU climbed up 10% yoy due to the newly acquired Citadines on Bourke Melbourne, which has a higher ADR. 
  • Spain’s RevPAU grew 9% yoy, thanks to increased demand from leisure travellers at Citadines Ramblas Barcelona. 

AEIs on track 

  • ART invested S$50m in 2015 to refurbish several properties. The ongoing refurbishment at Citadines Barbican London, Ascott Makati and Somerset Xu Hu Shanghai are on track for completion by 2Q16. 
  • In terms of capital management, ART raised an eight-year S$-bond and swapped it into a euro liability at 2.15% p.a., bringing its all-in blended borrowing costs down to 2.5% p.a. 
  • Asset leverage stands at 38.9% which suggests that acquisitions would be accompanied by equity fund raising. 

Advanced distribution of 1.585 Scts declared 

  • ART makes distributions to unitholders on a semi-annual basis (end-Jun and end-Dec). 
  • Following the equity placement on 14 Mar (94.8m new shares at S$1.055), it has declared an advanced distribution of 1.585 Scts for 1 Jan 2016 to 22 Mar 2016, which will be paid on 27 Apr 2016. 
  • The next distribution will be comprised of distribution income from 23 Mar 2016 to 30 Jun 2016. 

Maintain Hold, our preferred pick in the hospitality sector 

  • We reduce our DDM-based target price as we factor in the equity placement (from the recent NY acquisition) and align our discount rate with the sector. 
  • Due to limited upside, we maintain a Hold. 
  • We adjust FY17-18 DPU by +2%/-2%. If investors want exposure to the hospitality sector, our preferred pick remains ART. 
  • We like the group for its diversified global portfolio and stable income (c.40% of gross profit is contributed by master leases). 
  • Also, we believe it is on track to achieve its targeted AUM of S$6bn (currently S$5bn) by 2017.



LOCK Mun Yee CIMB Securities | YEO Zhi Bin CIMB Securities | http://research.itradecimb.com/ 2016-04-15
CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 1.14 Down 1.19


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