ASCOTT RESIDENCE TRUST (SGX:HMN)
Ascott Residence Trust - Recovery Momentum Continues
- Sequential improvement in RevPAU.
- Gradual pick up in corporate demand in March.
- Increasing asset allocation in longer-stay properties.
Ascott Residence Trust's RevPAU fell 47% y-o-y but improved 10% q-o-q in 1Q21
- Ascott Residence Trust (SGX:HMN)’s 1Q21 portfolio RevPAU fell 47% y-o-y to S$55 but improved 10% q-o-q, on the back of higher occupancy rate at mid-50% (up from ~mid-40% in 4Q20), supported by recovery in domestic travel and block bookings from government in some markets.
- As of 31 Mar 2021, 88% of Ascott Residence Trust's properties were operational while 10 were temporarily closed, mainly in Europe. Out of these 10 properties, six were on master leases and continued to receive fix rent, providing downside protection. Management expects to reopen these 10 properties progressively in 2Q21 ahead of summer holiday season.
Countries recovered at different pace
- Countries catering to long stays such as Indonesia, Philippines and Vietnam remained more resilient than those catering to transient travellers such as Japan and UK. China, with a large domestic market and low COVID-19 infection rates continued to lead the recovery with stable RevPAU performance y-o-y.
- In addition, occupancies continued to be supported by block bookings from government, long stays by student groups and corporates for some countries such as Singapore, Australia, US, France, and UK.
Acquisition of another rental housing property in Japan
- Ascott Residence Trust completed its maiden acquisition of student accommodation in Atlanta, US in Feb 2021 and announced the acquisition of its second rental housing property in Sapporo, Japan as part of its strategy to increase its asset allocation in longer-stay assets. The acquisition is expected to be completed in 2Q21.
- Despite recent global infection resurgence, we believe Ascott Residence Trust’s focus on corporate and long-stay serviced residences, geographically diversified portfolio and stable income sources from master leases, management contracts with minimum guaranteed income and longer stay properties (~75% of gross profit in 1Q21) could provide income stability to Ascott Residence Trust and a buffer to the fall in occupancy and room revenue.
- We increase our risk-free rate assumption from 1.55% to 1.9%. After adjustments, our fair value estimate for Ascott Residence Trust hence decreases from S$1.24 to S$1.22. BUY.
- See
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2021-05-03
SGX Stock
Analyst Report
1.22
DOWN
1.240
