Ascott Residence Trust - OCBC Investment 2019-07-31: In-line Results

ASCOTT RESIDENCE TRUST (SGX:A68U)

Ascott Residence Trust - In-line Results

ASCOTT RESIDENCE TRUST (SGX:A68U)’s 2Q19 revenue grew 2% y-o-y, or S$2m to S$132.5m, driven by the acquisition of Citadines Connect Sydney Airport (+S$0.8m) in May 2019 and higher revenue of S$2.3m from the existing properties in the Philippines, UK and Japan.
The increase in revenue was partially offset by the drop of S$1.1m from the divestment of Ascott Raffles Place Singapore.
Gross profit increased by 7% y-o-y, or S$4.5m to S$67.6m on the back of higher revenue as well as new accounting standard FRS 116 with effect from 1 Jan 2019.
On a same store basis, excluding the contributions from Ascott Raffles Place Singapore and Citadines Connect Sydney Airport and also the impact of the FRS 116 adjustments, 2Q19 gross profit growth would have been flat (+S$0.2m).
2Q19 DPU was 1.94 S cents, an 8% increase from 1.84 S cents in 2Q18. Excluding a one-off realised exchange gain arising from the repayment of foreign currency bank loans, 2Q19 DPU was 1.84S cents.
Together, 1H19 DPU was 3.43 S cents, making up 49% of our full-year forecast, in-line with expectations.

Portfolio RevPAU was S$158, an increase of 2% y-o-y.
The Philippines remained as one of the standouts which posted an 18% y-o-y increase in RevPAU, driven by the completion of refurbishment at Ascott Makati.
UK RevPAU increased by 11% y-o-y, boosted by corporate and leisure demand while Japan saw an increase of 8% RevPAU due to stronger demand for all services residences. We expect Japan to benefit from the increasing tourist arrivals for 2019 Rugby World Cup and 2020 Tokyo Olympics.
Meanwhile, Australia posted a 10% y-o-y drop in RevPAU, mainly due to the acquisition of Citadines Connect Sydney Airport which has a lower ADR. On a same store basis, Australia’s RevPAU would have reported a 4% drop, on the back of weaker leisure and corporate demand in Melbourne.

According to management, the proposed combination of Ascott Residence Trust and ASCENDAS HOSPITALITY TRUST (SGX:Q1P) has received positive support from the key unitholders and management will continue to engage the unitholders ahead of the Extraordinary General Meetings (EGM) which will be held in Oct.
As mentioned in our report dated 4 Jul - Ascott Residence Trust - The ART Of The Deal, we deem the terms of the merger positive for Ascott Residence Trust unitholders and would recommend voting in support of the merger at Ascott Residence Trust’s EGM.
Maintain HOLD, with an unchanged fair value estimate of S$1.31.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-07-31

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.310 SAME 1.310