Ascott Residence Trust - Maybank Research 2022-01-30: Raising Growth Targets


Ascott Residence Trust - Raising Growth Targets

Growing resilient income AUM, BUY

  • Ascott Residence Trust (SGX:HMN)’s 2H21 DPU of S$0.0227 was up ~14% y-o-y and ~11% h-o-h, helped by S$25m in distribution top-ups (similar to 2H20) and higher contribution from stable income assets. RevPAR growth picked up pace in 4Q21, and we see recovery gaining traction in FY22.
  • We continue to like Ascott Residence Trust for its diversified portfolio, concentrated long-stay assets, strong balance sheet, and ~S$300m in residual divestment gains to back capital distributions amid slow DPU growth.
  • Having scaled up on US student housing assets, Ascott Residence Trust has raised target allocation in longer-stay accommodation to 25-30% of AUM from 15-20%.

Higher stable income contribution

  • Ascott Residence Trust's 2H21 revenue/ gross profit increased ~30% y-o-y/ 49% y-o-y and ~13% h-o-h/ ~11% h-o-h, with stronger performances across most markets, and contributions from S$780m in deals, comprising 11 rental housing and student accommodation assets acquired at an average 5.0% EBITDA yield, 70% of which were completed from Sep-Dec 2021. Its stable income sources contributed ~70% of FY21 gross profit, with the addition of three Japanese rental properties (in Jun 2021).
  • We expect the remaining income from its management contracts to pick up in FY22E as accommodation demand rises alongside easing travel restrictions.

RevPAU recovery uneven, to strengthen in 2H22

  • Portfolio RevPAU climbed further in 4Q21 at 78% y-o-y/ 24% q-o-q to S$87, versus +49% y-o-y/+8% q-o-q in 3Q21, helped by a stronger pace of reopening. While most countries reduced social distancing and travel requirements, restrictions were introduced in Dec (in Australia, China, and France) in response to the Omicron variant spread.
  • RevPAU recovery remains on track but uneven, and should likely strengthen from 2Q22, in line with higher vaccination rates, and with the resumption of corporate travel.
  • We have pencilled in 25% y-o-y RevPAU growth, and a stronger h-o-h in 2H22 for Ascott Residence Trust.

Strong balance sheet, deal momentum

Chua Su Tye Maybank Research | https://www.maybank-ke.com.sg/ 2022-01-30
SGX Stock Analyst Report BUY MAINTAIN BUY 1.300 SAME 1.300