Ascott Residence Trust - Maybank Research 2022-04-29: RevPAU On A Climb

ASCOTT RESIDENCE TRUST (SGX:HMN)

Ascott Residence Trust - RevPAU On A Climb

Ascott Residence Trust (SGX:HMN)’s RevPAU jumped 22% y-o-y in 1Q22 on the back of better occupancy and higher ADRs. The performance was in line with expectation and we see improving fundamentals ahead, as RevPAU strengthens with the resumption of global travel, and contributions from its stable-income assets rise.

We continue to like Ascott Residence Trust for its diversified portfolio, concentrated longer-stay assets, strong balance sheet, and ~S$300m in residual divestment gains to support capital distributions amid an uneven DPU recovery.
We raised DPUs forecast for Ascott Residence Trust by 2% to reflect recent deals, and our DDM-based target price for Ascott Residence Trust to S$1.35 (COE 5.8%, LTG 2.0%). Maintain BUY.

RevPAU improved y-o-y in five of Ascott Residence Trust’s eight key markets, including Australia (at +6%), Japan (+37%), Singapore (+7%), the UK (+400%) and the US (+31%), while revenue was higher in France (at +8%). Its recovery pace slowed in Jan-Feb as COVID measures were tightened, but picked up strongly in Mar due to international corporate and leisure bookings, with restrictions lifted and cases receded.
China’s RevPAU fell 4% y-o-y, suggesting an uneven RevPAU recovery. We pencilled in 25% y-o-y RevPAU growth, and a stronger h-o-h in 2H22.

Its rental housing and student accommodation assets saw high occupancies at > 95%, including four US properties acquired in 4Q21 that remained fully-occupied. Ascott Residence Trust is seeing strong pre-leasing for the 2023 academic year, with rents projected to rise at 5% y-o-y. The segment accounted for ~28% of 1Q22 gross profit, from ~12% in 1Q21, with contribution expected to climb.
The S$125m turnkey acquisition of five Japanese long-stay assets completing from 1Q21-2Q23, should deliver 4.2% NOI yield and +1.7% DPU accretion.

Ascott Residence Trust's gearing was higher at 37.8% (vs 37.1% at end-Dec 2021) with a rise in AUM, while refinancing after 1Q22 increased its fixed-rate debt to ~78% (from ~74%), with a 50bps increase in interest rate lowering DPU by ~2.5%.
We see a S$1.9b debt headroom (50% limit) supporting acquisitions, as Ascott Residence Trust expects to add to its rental housing and student accommodation AUM, towards its medium-term 25-30% target (raised from 15-20% in 4Q21).
See

Chua Su Tye Maybank Research | https://www.maybank-ke.com.sg/ 2022-04-29

SGX Stock Analyst Report BUY MAINTAIN BUY 1.35 UP 1.300