Ascendas Hospitality Trust - DBS Research 2016-05-13: Opportunity not to be missed

Ascendas Hospitality Trust - DBS Research 2016-05-13: Opportunity not to be missed ASCENDAS HOSPITALITY TRUST Q1P.SI 

Ascendas Hospitality Trust - Opportunity not to be missed

  • 4Q16 DPU of 1.3 Scts (+4% y-o-y) below expectations
  • Strong contribution from Japan and China offset modest contribution from Singapore
  • 14% uplift in property valuations, NAV per unit now at S$0.86



Upgrade to BUY; Opportunity after recent correction. 

  • Following the c.10% correction in Ascendas Hospitality Trust (ASCHT)’s share price post ASCHT’s rejection of the potential takeover offer, value has now emerged. 
  • With the stock offering an attractive 8% yield and trading at a discount to our TP of S$0.80 and latest NAV per unit of S$0.86, we upgrade to BUY from HOLD. 
  • We believe the full value of ASCHT’s portfolio will be crystallised through consistent deliver of DPU growth.


Australian hotels’ performance is sustainable. 

  • We believe the Australian portfolio (55% of FY16 NPI), especially the Sydney and Melbourne hotels, will underpin ASCHT’s growth outlook. This is due to increasing tourist arrivals into Australia and modest supply of new hotels in Sydney and Melbourne.


Boost from Japan. 

  • Beyond the growth from its core Australian properties, ASCHT should also benefit from the expected uplift from its Japanese portfolio. 
  • ASCHT’s Japan properties are leveraged to the strong growth in international visitors on the back of a weaker JPY.


Valuation:

  • After imputing long term SGDJPY FX rate of 80 versus 92 previously, we raised our DCF-based TP to S$0.80 from S$0.77.


Key Risks to Our View:

  • Significant drop in AUD/JPY and demand/supply imbalance. Should the AUD/JPY drop significantly from current levels and there is excess supply in ASCHT’s respective markets, there will be downside risks to our DPU estimates and ASCHT may continue to trade at a discount to book value.




Mervin Song CFA DBS Vickers | Derek Tan CFA DBS Vickers | http://www.dbsvickers.com/ 2016-05-13
DBS Vickers SGX Stock Analyst Report BUY Upgrade HOLD 0.80 Up 0.77


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