Ascott Residence Trust - OCBC Investment 2017-07-21: AEI Success In The Philippines And Vietnam

Ascott Residence Trust - OCBC Investment 2017-07-21: AEI Success In The Philippines And Vietnam ASCOTT RESIDENCE TRUST A68U.SI

Ascott Residence Trust - AEI Success In The Philippines And Vietnam

  • Results within expectations.
  • Trading at 5.1% FY17F yield.
  • FV increases marginally to S$1.10.

2Q17 results boosted by one-off forex gain 

  • Ascott Residence Trust’s (ART) 2Q17 results were within expectation. 
  • 2Q17 revenue increased 4% YoY to S$123.6m while unitholders’ distribution grew 34% YoY to S$46.9m. 
  • DPU dropped 14% YoY from 2.13 S cents to 1.84 S cents, or 30% of our full-year forecast. After clarifications on the calculation of 2Q16, we estimate that excluding the S$11.9m one-off forex gain, DPU would have been around 1.63 S cents or 27% of our initial full-year forecast.

PH and VN RevPAU boosted by AEI success 

  • Group-wide 2Q17 RevPAU for ART’s assets under management contracts increased 3% YoY to S$146. 
  • Going by country, ART’s assets in Belgium, the Philippines, and Vietnam each clocked high RevPAU growth rates ranging from 18% to 36% YoY in SGD terms. In particular, ADRs for Somerset Ho Chi Minh City and Somerset Millennium Makati increased 23% and 14% YoY respectively after they were renovated last quarter. 
  • We expect similar double-digit ADR growth following the refurbishment of Citadines Barbican London, which was finished in Jun. 
  • Meanwhile, Singapore, Japan, and Indonesia clocked mid-single digit YoY RevPAU declines. 
  • We note that the master leases for three assets in France and one asset in Singapore (contributing around ~8% of portfolio gross profit in total) are due to expire this year. We expect the sponsor to renew those master leases with little change in the terms.

Maintain HOLD 

  • The acquisitions of DoubleTree by Hilton Hotel New York and Ascott Orchard Singapore (AOS) are expected to be completed in Aug 2017 and 4Q17, respectively. Gearing is expected to increase from 32.4% to ~36% after the completion of these transactions. 
  • We note the possibility that divestment proceeds from the asset sales in Japan (and later China) may be used to top up ART’s distributable income, a decision management says will be made at year- end. Given the uncertainty surrounding this, we choose not to incorporate such a possibility into our forecasts. 
  • After adjustments, our fair value increases from S$1.095 to S$1.10. Against yesterday’s closing price, ART is trading at 5.1% FY17F yield and 6.0% FY18F yield. Maintain HOLD with a fair value of S$1.10.

Deborah Ong OCBC Investment | 2017-07-21
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.10 Up 1.095