Ascott Residence Trust - OCBC Investment 2016-04-18: A decade of transformation

Ascott Residence Trust - OCBC Investment 2016-04-18: A decade of transformation REIT ASCOTT RESIDENCE TRUST A68U.SI 

Ascott Residence Trust: A decade of transformation 

  • 1Q16 DPU down marginally by 0.6% YoY 
  • Improvement seen from several countries 
  • Growth likely to pick up 

Celebrating its 10th anniversary since its listing 

  • Ascott Residence Trust (ART) marked its 10 years of listing as the first hospitality REIT on SGX-ST following its IPO on 31 Mar 2006. 
  • In our view, ART has come a long way, starting with just 12 properties and an asset size of S$856m. Its portfolio now comprises 89 properties with 11,292 apartment units across 14 countries with an asset size of ~S$4.8b. 
  • Whilst its 1Q16 DPU of 1.75 S cents was slightly lower by 0.6% as compared to 1Q15 and formed just 21.1% of FY16 forecast, we judge this to be within our expectations. This is because 1Q is seasonally a softer period, and contribution from its proposed Sheraton Tribeca New York Hotel acquisition has yet to kick in (expected completion this month). Hence we expect ART’s growth momentum to pick up in the coming quarters. 
  • Its gross revenue and gross profit jumped 17.2% and 12.6% YoY to S$105.5m and S$48.6m, respectively. 

Portfolio RevPAU improved 10% YoY 

  • ART saw improvement in the operational performance of several countries, notably China (stronger demand from project groups in first tier cities), Australia (contribution from acquisition of Citadines on Bourke Melbourne in Jul 2015), Malaysia (stronger corporate demand) and Spain (more leisure travellers). 
  • On an overall portfolio basis, ART registered a 10% YoY growth in its RevPAU to S$125. This was underpinned by new acquisitions which commanded a higher average daily rate. 

Maintain BUY 

  • We trim our FY16 DPU forecast slightly by 1.3%, as we update our assumption on the completion date of the Sheraton Tribeca New York Hotel acquisition (previously factored in completion on 1 Apr). However, our fair value estimate remains unchanged at S$1.29. 
  • Reiterate BUY on ART, as we continue to see value at current share price level, with the stock trading at FY16F distribution yield of 7.3% and P/B ratio of 0.79x. 

Wong Teck Ching Andy CFA OCBC Securities | 2016-04-18
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 1.29 Same 1.29