ASCOTT RESIDENCE TRUST
A68U.SI
Ascott Residence Trust (ART SP) - Portfolio Reconstitution
- Ascott Residence Trust (ART) sells two Chinese properties for RMB980m, 69% above book value.
- Gearing to settle around 35-36%.
- Disposal consistent with strategy to sell low yielding properties to be recycled into higher yielding assets.
What’s New
- Ascott Residence Trust (ART) announced that it has sold two properties in China - Citadines Biyun Shanghai and Citadines Gaoxin Xian - for an aggregate consideration of RMB980m (c.S$198m), which is 69% above the valuation of the two properties as at 31 December 2016.
- We understand the exit yield is substantially below the initial acquisition yield of 4.5-5.0%.
Financial impact
- ART expects to book a net gain of c.RMB239m (S$48.3m) post the disposal of the two properties.
- Proforma FY16 DPU (which excludes the impact of the recent rights issue) is expected to fall to 8.23 Scts from 8.27 Scts.
- Gearing subject to the final funding structure for the proposed acquisition of DoubleTree by Hilton, and Hotel New York Times Square South; gearing should settle at around 35-36%.
Our Take
- We are supportive of ART’s plans to sell its lower yielding properties and recycling the proceeds into higher yielding assets such as the DoubleTree property in New York at a proforma net property income (NPI) yield of 6%. These disposals are consistent with ART’s strategy of selling properties with limited growth potential or at attractive valuations.
- For now, we maintain our BUY call with Target Price of S$1.16 pending ART’s upcoming 2Q17 results.
Melvin SONG CFA
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Derek TAN
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http://www.dbsvickers.com/
2017-07-04
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