Ascott Residence Trust - UOB Kay Hian 2017-10-25: 3Q17 Results Of ART In Line

Ascott Residence Trust - UOB Kay Hian 2017-10-25: 3Q17 Results Of ART (n Line ASCOTT RESIDENCE TRUST A68U.SI

Ascott Residence Trust - 3Q17 Results Of ART (n Line

  • Ascott Residence Trust (ART)’s results were in line with expectations.
  • RevPAU was boosted by Belgium, Spain and the UK, but this was partially offset by Singapore, Japan and the US. Maintain HOLD with an unchanged target of S$1.18.
  • Maintain OVERWEIGHT on the sector.

Ascott Residence Trust (ART SP/HOLD/S$1.22/Target:S$1.18)

  • Results in line with expectations; maintain *HOLD with an unchanged target price of S$1.18, based on DDM (required rate of return: 7.7%, terminal growth: 2%). 
  • Ascott Residence Trust (ART) posted a 3Q17 DPU of 1.69 S cents, down 28% yoy (-8% qoq). The decline was largely due to the enlarged unit base from the S$100m private placement. Unitholders’ distribution for 3Q17 also included a one-off realised exchange gain of S$11.9m. 
  • 9M17 revenue growth was attributable to the acquisition of Citadines City Centre Frankfurt, Citadines Michel Hamburg and DoubleTree by Hilton Hotel New York – Times Square South in 2017, acquisition of Sheraton Tribeca New York Hotel in 2016 as well as higher revenue from existing properties, but this was partially offset by divestments. 
  • The results were in line with our expectation, with 9M17 DPU representing 73% of our full-year forecast.

Performance across geographies. 

  • RevPAU rose 2% yoy to S$140. Belgium, Spain and the UK were among the best markets in 3Q17, with RevPAU increasing 43%, 8% and 5% respectively. In Asia, RevPAU in the Philippines climbed 17% because of higher demand for the renovated Ascott Makati and Somerset Millennium Makati.
  • Some of the weaker markets include Singapore, Japan and the US, which were affected by an oversupply of accommodation and weaker corporate demand. 
  • On a portfolio basis, the decrease in RevPAU for properties under management contract was just 1%. Over 40% of its gross profits are contributed by stable income from management contracts and master leases, which guarantee a minimum income.

Completed acquisition of DoubleTree property and Ascott Orchard Singapore.

  • DoubleTree property started contributing to ART’s portfolio since Aug 17 and contributed ~2.4% to 3Q17 gross profit, while Ascott Orchard Singapore will be contributing from 4Q17 onwards and is projected to lift gross profit by > 5%.

Gearing set to rise. 

  • Gearing for 3Q17 was at 31.9%; however, upon the completion of the acquisition of Ascott Orchard Singapore and divestment of Citadines Biyun Shanghai and Citadines Gaoxin Xi’an, gearing would be approximately 36%.

Vikrant Pandey UOB Kay Hian | Loke Peihao UOB Kay Hian | 2017-10-25
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.180 Same 1.180