ASCOTT RESIDENCE TRUST (SGX:HMN)
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
- Ascott Residence Trust's gearing was higher at 37.1% (from 35.3% at end-Sep 2021) with ~S$364m of new student accommodation assets added. Its portfolio saw S$147.3m in valuation gains, with an improving outlook and stronger performance of assets in the UK, US and France.
- A S$1.9b debt headroom (50% limit) is supportive of deals, with management expected to add to its student accommodation and rental housing segments, as it expands this from 16% (versus 5% at end 2020), towards its new 25-30% AUM target (from 15-20%).
- See
- We adjust FY22-23 DPUs forecast for Ascott Residence Trust by 2-3% from recent deals, and keep our DDM-based target price for Ascott Residence Trust at S$1.30 (COE 5.9%, LTG 2.0%).
Chua Su Tye
Maybank Research
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https://www.maybank-ke.com.sg/
2022-01-30
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