Ascott Residence Trust - Maybank Kim Eng 2021-01-27: Recycling Capital

ASCOTT RESIDENCE TRUST (SGX:HMN)

Ascott Residence Trust - Recycling Capital

Ascott Residence Trust (SGX:HMN)’s FY20 distribution at S$0.0303/unit (-60% y-o-y) was in line with our estimate and at the higher-end of its profit guidance. The performance was on the back of softer RevPAU (-61% y-o-y), and lower gross profit (-41% y-o-y), which were cushioned by long-stays in China and Vietnam.
With progress on vaccine rollouts uneven, RevPAU recovery in FY21 will be slow. We continue to like Ascott Residence Trust for its diversified portfolio, concentrated long-stay assets, strong balance sheet, and S$200m in residual divestment gains which may lift capital distributions amid slower DPU growth.

Ascott Residence Trust's valuations are undemanding at 0.8x FY21E P/B. Our DDM-based target price stays at S$1.25 (COE 5.5%, LTG 2.0%).

Ascott Residence Trust divested Somerset Azabu East Tokyo for JPY5.9b (S$76.2m) at ~2% exit yield (63% above book) and Ascott Guangzhou at CNY780m (S$159.0m) at ~3% exit yield (52% above book). The divestments of the two Citadines properties in France at 35-69% above book are set to complete in 1Q21.
Ascott Residence Trust has recycled proceeds to acquire Signature West Midtown, a 183-unit (525-bed) freehold, student accommodation asset in Atlanta, Georgia for USD95.0m (S$126.3m). The transaction, at 5% EBITDA yield implies 4.4% DPU accretion (40% debt funded, remainder from divestment proceeds), and is expected to be completed by end 1Q21.

Ascott Residence Trust's properties in China and Vietnam which serve long-stays, fared relatively better in 2H20. China’s RevPAU fell 27% y-o-y (versus -30% y-o-y in 3Q20), 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 fell 68% y-o-y (versus -50% y-o-y in 3Q20) on the back of weaker ADRs (which are set to persist in 1Q21).
Ascott Residence Trust extended the expiring master leases in France, with adjustments to the rent structure.
We see a slow RevPAU recovery, as risks remain in terms of the pace of vaccine roll-out, with significant easing of lockdowns and border controls from 2H21.

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.
Ascott Residence Trust's AUM fell 7% y-o-y due to weaker performance across the portfolio, while gearing remains low at 36.3% (up q-o-q from 34.6%) and debt headroom at S$1.9b is supportive of deals. We believe these are likely in the student accommodation and multi-family segments, as it adds to AUM and takes advantage of favourable fundamentals in the US on the back of strong domestic demand.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-01-27

SGX Stock Analyst Report BUY MAINTAIN BUY 1.250 SAME 1.250