ASCOTT RESIDENCE TRUST (SGX:A68U)
Ascott Residence Trust - Another Stable Quarter
In line, maintain HOLD – prefer CDLHT and FEHT
- ASCOTT RESIDENCE TRUST (SGX:A68U)’s 3Q19 DPU was +4.9% y-o-y and in line with our/consensus estimates; the income loss from Ascott Raffles Place divestment was partially offset by a stronger contribution from its properties in Europe. See Ascott REIT Announcements; Ascott REIT Latest News.
- We will revisit estimates upon completion of its AHT-merger, expected in Dec 2019, which could result in a 2.0-2.5% DPU boost. For now, 9M19 has met 74% of our full-year estimate and our forecasts are unchanged. See Ascott REIT Dividend History.
- Our DDM- based Target Price rises 4% to SGD1.35 (COE 7.4%, LTG 2.0%), assuming a lower cost of equity (from 7.6%). Reiterate HOLD with shares fairly valued. See Ascott REIT Share Price; Ascott REIT Target Price.
- We prefer CDL HOSPITALITY TRUSTS (SGX:J85) (BUY, Target Price SGD1.80) and FAR EAST HOSPITALITY TRUST (SGX:Q5T) (BUY, Target Price SGD0.80) as they are better leveraged to a Singapore RevPAR rebound.
Mixed bag – Europe performed better
- Ascott Residence Trust's 3Q19 revenue declined 1.5% y-o-y mainly due to the Ascott Raffles Place divestment, even as gross profit rose 1.4% y-o-y. Its portfolio RevPAU dipped 1.9% y-o-y (vs a +1.9% y-o-y in 2Q19) primarily due to weaker exchange rates. Its assets in Belgium, Spain, Singapore, the UK and Vietnam delivered stronger performances, reporting RevPAU growth of 3.7-18.9% y-o-y. These helped offset weaker results in Australia, China, Japan and the US, with their RevPAUs down 5.2-19.5% y-o-y.
Gross profit led by ‘growth’ income
- Gross profit from its ‘stable’ income fell 6.0% y-o-y due to lower rents renewed for its French master leases. But this was mitigated by stronger corporate and leisure demand in the UK, helped by the weak GBP.
- Gross profit from its ‘growth’ income rose 6.9% y-o-y due to strong corporate demand in Vietnam and FRS 116 adjustments on its US properties. We see supply pressures capping US room rates in the near term.
Less leveraged to Singapore sector recovery
- Its Singapore assets, now contributing 17.6% of AUM and 10.3% of its gross profit, saw strong corporate and leisure demand at Ascott Orchard, in line with a recovery in RevPARs across the sector.
- We remain positive on growth fundamentals due to rising demand and tapering 2018-2022 supply. However, Ascott Residence Trust’s exposure has fallen and is low relative to other hospitality REITs.
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2019-10-31
SGX Stock
Analyst Report
1.35
UP
1.300
