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

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.

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.

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 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 | http://research.uobkayhian.com/ 2017-10-25

UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.180 Same 1.180