Maybank Kim Eng analyst Chua Su Tye has rated “buy” on Ascott Residence Trust (ART) with a maintained target price of $1.05 after it reported a 27% increase q-o-q in its revenue per average unit (RevPAU) to $47.
Portfolio occupancy also improved 10 percentage points q-o-q to 40% for the 3QFY2020, which 93% of its 88 properties operational, up from 76% in 2QFY2020.
“Demand from government contracts and long-stays cushioned its net property income (NPI), while domestic demand has gained pace (especially in China) and should support RevPAU recovery in FY21,” says Chua.
“We like its diversified portfolio, concentrated long-stay assets, and $180 million in residual divestment gains to lift capital distributions amid slower DPU growth. Valuations are undemanding at 0.8x price-to-book (P/B)”, he adds.
UOB Kay Hian analysts Loke Peihao and Jonathan Koh have, on the other hand, rated “hold” on ART with a lower target price of 91 cents from $1.00 previously.
While ART saw a gradual recovery, Loke and Koh feel the trust is not “out of the pandemic woods yet”.
Read Also: Analysts mixed over CDLHT as it posts weaker 3Q20 results
“Barring a virus resurgence, management expects a gradual pick-up in occupancies but limited ADR growth, led by domestic segments,” say the analysts.
ART’s properties anchored with long stays and in countries with large domestic markets such as China, France, Japan and the US, are expected to lead the recovery.
Markets in lockdown and who are traditionally reliant on shorter stays may still see a weaker 4QFY2020.
“Management also expects property valuations to decline 5-10% (15% in certain instances) depending on their locations, although it sees Asia Pacific properties relatively less impacted. Depending on the market outlook and divestment gains unlocked, distribution payout will also be reviewed holistically,” they add.
To this end, Loke and Koh have also reduced their distribution per unit (DPU) forecasts for 2020-2022 by 0 to 9%, which factors in steeper RevPAR declines for Japan, Vietnam and Singapore at -79% (from -76%), -47% (from -45%) and -37.5% (from -34%) respectively.
The analysts say they also expect more gradual recoveries ranging from 40 to 65% for 2021-2022.
As at 9.56am, units in ART are trading 0.5 cent higher or 0.6% up at 86.5 cents.
