Ascott Residence Trust - OCBC Investment 2018-11-02: SG RevPAU Up 19% Y-o-y!


Ascott Residence Trust - SG RevPAU Up 19% Y-o-y!

  • Ascott Residence Trust 3Q18 within expectations.
  • Healthier prospects for portfolio.
  • Fair Value up from S$1.00 to S$1.03.

In-line set of results with DPU up 7.7% y-o-y

  • Ascott Residence Trust’s (ART) 3Q18 results were within expectations with 9M18 DPU coming up to 73.4% of our initial full-year forecast.
  • Revenue increased 6.0% y-o-y to S$134.5m on the back of additional revenue of S$6.2m from acquisitions (Ascott Orchard Singapore and DoubleTree by Hilton Hotel NY), S$3.6m higher revenue from existing properties, partially offset by a S$2.2m decrease as a result of divestments. As a result, gross profit increased 9.2% y-o-y to S$64.1m.
  • All-in-all, 3Q18 DPU increased 7.7% to 1.82 S cents.

Stellar double-digit RevPAU growth in Singapore!

  • Ascott Residence Trust’s 3Q18 portfolio RevPAU increased 8% y-o-y to S$158. Notably, Singapore clocked a 19% RevPAU increase to S$217, due to higher market demand (both corporate and leisure) and higher ADR as revenue in 3Q17 was affected by a long stay project group with lower ADR. We highlight that this is the highest SG RevPAU since 3Q15.
  • In China, RevPAU in SGD terms increased by 14% due to the divestment of Citadines Gaoxin Xi’an and Citadines Biyun Shanghai, which had lower RevPAU as compared to the other properties in China. Excluding the divested properties, China RevPAU increased closer to 3% y-o-y.
  • Meanwhile, United Kingdom and Philippines RevPAU (SGD terms) grew 7% and 8% y-o-y respectively while the other geographies each posted a < 5% increase in RevPAU.

Generally more optimistic outlook

  • The latest set of results suggests a more optimistic outlook for many of the geographies within Ascott Residence Trust’s portfolio, and we make upward adjustments to our forecasts accordingly. After adjustments, our fair value increases from S$1.00 to S$1.03.
  • We continue to like Ascott Residence Trust’s portfolio of assets with its strong brand recognition and high geographical diversification.
  • Gearing stands at a reasonable rate of 36.4% as at 30 Sept 2018, with ~82% of Ascott Residence Trust’s total borrowings on fixed interest rates. Ascott Residence Trust is currently trading at a 6.5% FY19F dividend yield.
  • Since our Sell call on 25 Jul, Ascott Residence Trust’s share price has corrected 7% to yesterday’s close. Given the share price decline, we upgrade Ascott Residence Trust from Sell to HOLD with a fair value of S$1.03.

Deborah Ong OCBC Investment Research | 2018-11-02
SGX Stock Analyst Report HOLD UPGRADE SELL 1.03 UP 1.000