ASCOTT RESIDENCE TRUST (SGX:HMN)
Ascott Residence Trust - Benefitting From Recovery In Europe & Expansion In Long-Stay Assets
- Ascott Residence Trust’s Europe portfolio, which accounts for 20.4% of its total assets, benefits from the recovery in intra-regional travel due to the launch of digital vaccination certificates and reopening of international borders. Ascott Residence Trust has a medium-term plan to increase asset allocation to student accommodation and rental housing to 15-20% of portfolio value, which will enhance resiliency.
- Ascott Residence Trust’s distribution yield is expected to improve from 4.2% in 2021 to 5.2% for 2022. Upgrade to BUY.
Benefitting from reopening and recovery in EU and UK.
- Member states of the EU have eased COVID-19 restrictions since May 21, while the UK dropped all COVID-19 restrictions during “Freedom Day” on 1 Jul 21. Ascott Residence Trust (SGX:HMN) has presence in Belgium and Spain, which have the highest vaccination rates in EU of 71.0% and 75.5% respectively as of Sep 21, as well as in France and Germany which have vaccination rates of 63.1% and 61.6% respectively.
- 64.6% of the UK’s population is fully vaccinated against COVID-19. Economic activities have been unaffected by the outbreak of the Delta variant because the high vaccination rates have prevented a rise in serious cases and deaths.
Recovery of intra-regional travel triggered by opening of borders.
- The EU has eased a longstanding ban on non-essential travel to a staycation boom.
Europe on a steady path to a full-fledged recovery.
- Digital vaccination certificates have unleashed pent-up demand for intra-regional travel. Low-cost carriers have reported a surge in late summer bookings. Similarly, bookings for accommodation have recovered to 70% of pre-COVID-19 levels in Aug 21.
- We expect Europe’s and Singapore’s hospitality industries to experience a full-fledged recovery in 2023, a year ahead of the Americas and other countries in the Asia Pacific region, due to their high vaccination rates.
Expanded scope of investment mandate.
- Ascott Residence Trust has expanded its principal on 27 Feb 21.
- Student accommodation is an attractive asset class:
- Student to prepare for the eventual economic upturn. They are able to provide stable contributions even during recessions.
Enhancing diversification and resiliency by building scale in long-stay assets.
- Ascott Residence Trust has acquired three Japan (Sapporo) in 9M21. The allocation to these long-stay assets increased by 6ppt year-to-date to 11% of portfolio value.
- Ascott Residence Trust plans to increase 12% of group gross profit.
Upgrade Ascott Residence Trust to BUY.
- We maintain our existing earnings forecast for Ascott Residence Trust. The positive contributions from broaden to the Asia Pacific region and the Americas.
- See
- Ascott Residence Trust’s distribution yield is expected to improve from 4.2% for 2021 to 5.2% for 2022. It trades at P/NAV of 0.82x, which is a discount compared to peer CDL Hospitality Trusts (SGX:J85) at 0.89x. See the 13-page report attached below for complete analysis and peer comparison table.
- Catalysts:
- Yield-accretive acquisitions for student accommodation and rental housing properties.
- Contribution from lyf one-north, its maiden development project, which is scheduled for completion in 4Q21.
- Recovery of the hospitality industry in Europe and Singapore, followed by the Asia Pacific and the Americas.
Jonathan KOH CFA
UOB Kay Hian Research
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https://research.uobkayhian.com/
2021-09-16
SGX Stock
Analyst Report
1.16
UP
1.090
