ASCOTT RESIDENCE TRUST (SGX:HMN)
Ascott Residence Trust - Delivering On Deals
- Ascott Residence Trust (SGX:HMN) is raising ~S$150m (or S$200m including a S$50m upsized option) to fund its latest acquisition, at 3.2-6.5% EBITDA yield. The assets should help strengthen its stable income contribution and push its long-stay assets closer to its medium-term target.
- Beyond an ~8% AUM and 2.8% DPU boost, we see upside to yields from recovering RevPAU. Our forecasts and S$1.40 DDM-based target price for Ascott Residence Trust are unchanged pending deal closure.
Buying S$318m portfolio from sponsor
- Ascott Residence Trust will acquire a portfolio of 9 serviced residences (SRs), rental housing and student accommodation properties in France, Japan, Vietnam, the US, and Australia from its sponsor, at a S$318m capitalised cost (or S$350m including development capex for the Columbia asset).
- The assets are well-placed, and should help Ascott Residence Trust gain further foothold in its core markets.
- We see upside on yields, underpinned by recovering RevPAU; occupancies for the SRs (currently at 80-95%) are at or above pre-COVID levels, and we see room for this to improve as ADRs rise on the back of demand recovery.
Higher stable income, long-stay assets contribution
- We expect contribution from stable income sources to increase to 71% of Ascott Residence Trust’s gross profit post-deal (from 69%), given the higher contribution from master leases (in France and Vietnam) which back its new SR properties.
- Meanwhile, longer-stay assets should rise to 19% of AUM (from 17%), pushing it closer to its 25-30% medium-term target.
- Deal flow remains strong, in our view, and should provide tailwinds to further AUM growth.
Upside from acquisitions; Adding AUM at 2.8% accretion
- Ascott Residence Trust's gearing is set to rise to 38.5% (from 37.5% as at end-Jun 2022), as management eyes a 54-46% debt-equity funding structure, to deliver a +2.8% DPU accretion. The acquisition should boost Ascott Residence Trust’s AUM by ~8% to S$8.3b upon completion in Nov 2022.
- We see S$1.6b debt headroom (50% limit) supporting further acquisitions, as its new CEO looks to leverage on Ascott Residence Trust’s strong financial position to drive growth of its more resilient, long-stay AUM.
- See
- We continue to like Ascott Residence Trust’s diversified portfolio, concentrated long-stay assets, strong balance sheet, and ~S$300m in residual divestment gains, which could add to capital distributions amid its DPU recovery. BUY.
Chua Su Tye
Maybank Research
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https://www.maybank-ke.com.sg/
2022-08-15
SGX Stock
Analyst Report
1.40
UP
1.350
