ASCOTT RESIDENCE TRUST (SGX:HMN)
Ascott Residence Trust - Green Shoots Of Recovery
- Worst is likely over for Ascott Residence Trust.
- Beneficiary of vaccine development.
- Higher fair value estimate of S$1.20.
Sequential improvement in RevPAU
- While Ascott Residence Trust (SGX:HMN)’s 3Q20 portfolio RevPAU fell 70% y-o-y to S$47, we saw a 27% improvement on a q-o-q basis. Average portfolio occupancy increased from 30% in 2Q to 40% in 3Q20. The recovery was largely driven by easing travel restrictions, reopening of temporarily closed properties, recovery in domestic travel in some markets and block bookings from government.
- As of 29 Oct 2020, 93% of Ascott Residence Trust's properties are operational while six properties remain closed due to low occupancy or to minimise costs. Recall that 21 properties were temporarily closed in 1H20. Ascott Residence Trust reopened 15 properties in 3Q and we expect the remaining six properties to gradually reopen as situation normalises.
Attractive valuation
- Pfizer’s announcement of favourable phase 3 data on its COVID-19 vaccine which is ‘more than 90% effective' is definitely a good news for the hospitality sector, and this was reflected in the strong share price performance of hospitality names last week. As at 13 Nov’s close, Ascott Residence Trust is trading at 0.8x forward P/B which is almost 1 s.d. below its historical mean of 0.88x. We find valuations undemanding, especially given the positive vaccine development.
Ascott Residence Trust remains our top pick within the hospitality sector
- While the situation in Europe and the U.S. remains uncertain with the resurgence of COVID-19 cases, we believe Ascott Residence Trust’s focus on corporate and long-stay serviced residences could provide a buffer to the fall in occupancy and room revenue.
- In addition, Ascott Residence Trust’s geographically diversified portfolio with 68% of its assets in the Asia Pacific region could benefit from the earlier recovery given the more stabilised infection rates in the region.
- See Ascott Residence Trust Share Price; Ascott Residence Trust Target Price; Ascott Residence Trust Analyst Reports; Ascott Residence Trust Dividend History; Ascott Residence Trust Announcements; Ascott Residence Trust Latest News.
- Factoring in the development on vaccines, we increase our Ascott Residence Trust's DPU forecast for FY21 by 6% and FY22-24 by 3% while decreasing our cost of equity assumption from 8.3% to 7.3% to account for the improved sentiment and outlook. Our fair value estimate hence increases from S$0.97 to S$1.20.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2020-11-16
SGX Stock
Analyst Report
1.20
UP
0.970
