Ascott Residence Trust - Maybank Kim Eng 2020-11-01: Long On Long-Stays


Ascott Residence Trust - Long On Long-Stays

Slow RevPAU recovery, undemanding valuations

  • Ascott Residence Trust (SGX:HMN)’s 3Q20 RevPAU fell 70% y-o-y but rose 27% q-o-q to S$47 as portfolio occupancy improved to 40% (from 30% in 2Q20), with 93% of its 88 properties operational, up from 76% in 2Q20.
  • Demand from government contracts and long-stays cushioned Ascott Residence Trust's NPI, while domestic demand has gained pace (especially in China) and should support RevPAU recovery in FY21.
  • We like Ascott Residence Trust's diversified portfolio, concentrated long-stay assets, and S$180m in residual divestment gains to lift capital distributions amid slower DPU growth.
  • Ascott Residence Trust's valuations are undemanding at 0.8x P/B. Our DDM-based Target Price stays at S$1.05 (COE 6.7%, LTG 2.0%). BUY.

China, Singapore, Vietnam fared better

  • Ascott Residence Trust's assets in China, Singapore and Vietnam, which serve long-stays, fared relatively better.
    • China’s RevPAU fell 30% y-o-y with lower occupancies but rose q-o-q, led by a recovery in domestic demand, especially in its tier-1 cities.
    • In Singapore, occupancies were backed by government contracts for isolation purposes, while RevPAU was -50% y-o-y on the back of weaker ADRs.
    • Vietnam’s RevPAU fell 58% y-o-y as long-stay corporate demand cushioned occupancies, and should rise as travel restrictions ease.

Closures in UK, US, lockdown in France

  • Ascott Residence Trust's NPI declined in
    1. Australia, with RevPAU at -63% y-o-y from movement restrictions and rental waivers,
    2. Japan with RevPAU at -91% y-o-y due to the absence of transient travel demand,
    3. UK with RevPAU at -89% y-o-y against lower occupancies, and
    4. US with RevPAU at -78% y-o-y due to the temporary closure of the Element Times Square on the back of weak corporate demand.
  • Contribution from Ascott Residence Trust's French master leases are set to fall, as four were extended by a year on variable terms and six expiring in Dec are being reviewed. We expect further lockdown measures recently introduced in Europe to constrain near term RevPAU recovery.

Ascott Residence Trust's strong balance sheet to support deals

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-11-01
SGX Stock Analyst Report BUY MAINTAIN BUY 1.050 SAME 1.050