Ascott Residence Trust - Maybank Kim Eng 2019-12-19: A Slower Recovery

ASCOTT RESIDENCE TRUST (SGX:A68U) | SGinvestors.io ASCOTT RESIDENCE TRUST (SGX:A68U)

Ascott Residence Trust - A Slower Recovery


Adding Ascendas Hospitality Trust’s assets; FY20 DPU up 2.0%




SG’s contribution has fallen, amidst strong tailwinds

  • ASCOTT RESIDENCE TRUST’s SG contribution has declined to 8% and 10% of total revenue and NPI with recent divestments, even as hospitality sector fundamentals are set to improve further, buoyed by a recovery in tourism numbers in 2H19 which have pushed hotel occupancies to 5-year highs.
  • We see growth momentum into 2020 from a stronger corporate event calendar, while a tapering supply outlook could lift room rates to strengthen RevPARs. ASCOTT RESIDENCE TRUST will divest its Somerset Clarke Quay which could lower our FY20-21 DPUs by 2% with the completion of the exercise in in 1Q20.


Stable income up, low AU RevPAU visibility

  • Its NPI profile should tilt towards stable income but its Australian contribution rises from 7% to 21% of revenue and from 8% to 13% of NPI, with the addition of ASCENDAS HOSPITALITY TRUST’s portfolio (six hotels valued at SGD612.2m). We remain cautious on the market’s near-term RevPAR outlook, largely due to high new supply.
  • We see possible synergies with its hospitality brands, but these are likely in the medium term, with a high concentration of master lease structures (in Japan, S. Korea and SG).


Index inclusion a likely event in 1Q20

  • ASCOTT RESIDENCE TRUST’s higher 82% developed market EBITDA contribution from the combined portfolio (up from 75%) and increased SGD2.4b free-float (from SGD1.6b) is above the SGD1.7b index threshold, and should place it well for an inclusion in the FTSE EPRA NAREIT Developed Index in the upcoming Mar 2020 review.
  • Valuations now at 5.3% div yield and 4% DPU growth trails peers against a sector recovery.





Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-12-19
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.40 UP 1.350



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