Ascott Residence Trust - UOB Kay Hian 2018-01-29: 4Q17 Results Of ART In Line

Ascott Residence Trust - UOB Kay Hian 2018-01-29: 4Q17 Results Of ART In Line ASCOTT RESIDENCE TRUST A68U.SI

Ascott Residence Trust - 4Q17 Results Of ART In Line

  • Ascott Residence Trust’s results are in line with our expectations.
  • Maintain HOLD with unchanged target price of S$1.23. 
  • Maintain sector OVERWEIGHT.



Ascott Residence Trust (ART SP/HOLD/S$1.26/Target:S$1.23)


Results in line with expectations; maintain HOLD with unchanged target price of S$1.23, based on DDM (required rate of return: 7.7%, terminal growth: 2.3%). 

  • Ascott Residence Trust (ART) posted 4Q17 DPU of 2.4S cents, flat y-o-y (21% q-o-q). Unitholders’ distribution for FY17 hit a record S$152.2m, 13% y-o-y due to contribution from Ascott REIT’s acquisitions in 2017 as well as one-off distribution of S$6.5m to unitholders, which is part of the gain from the divestment of Citadines Biyun Shanghai and Citadines Gaoxin Xi’an in China. 
  • FY17 distribution included a one-off realised forex gain of S$11.9m arising from the repayment of foreign currency bank loans with the proceeds from the rights issue (pending the deployment of funds to part finance the acquisition of Ascott Orchard Singapore). 
  • The results are in line with expectations, with FY17 DPU representing 102.9% of our full-year forecast.

Singapore revenue per available unit (RevPAU) rose 6% y-o-y to S$185 due to stronger corporate demand. 

  • Management expects pressure on rates in 2018 due to a combination of new supply and corporates tightening their travel budgets, but outlook remains generally positive with the opening of Changi Airport Terminal 4, robust mice activities and efforts to boost tourism.

Belgium, the Philippines and China were among the best markets in 4Q17, with RevPAU increasing 22%, 13% and 12% respectively. 

  • Some of the weaker markets included Indonesia, Japan and the US, which were affected by an oversupply of accommodation and weaker corporate demand. 
  • On a portfolio basis, the increase in RevPAU for properties under management contract was 6%. Over 40% of its gross profits are contributed by stable income from management contracts and master leases, which guarantees minimum income.

Gearing up 4.3ppt to 36.2%. 

  • Gearing for 4Q17 was at 36.2% (3Q17:31.9%), up 4.3ppt due to upon the completion upon the completion of the acquisition of Ascott Orchard Singapore and divestment of Citadines Biyun Shanghai and Citadines Gaoxin Xi’an.
  • Management noted that while demand is expected to remain resilient in Japan and Manhattan, the US on the back of global economic outlook remaining largely positive, room supply is projected to steadily increase in the near future, potentially exerting a downwards pressure on rates.




Vikrant Pandey UOB Kay Hian | Loke Peihao UOB Kay Hian | http://research.uobkayhian.com/ 2018-01-29
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.230 Same 1.230



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