SINGAPORE (April 17): UOB Kay Hian is reiterating its “hold” recommendation on Ascott Residence Trust (ART) at a target price of $1.20 following news of the trust’s agreement made last week to divest its trust beneficiary interests of 18 rental housing properties in Japan to Nikko Zenith GK9.
(See also: Ascott Residence Trust to divest interests in Japan rental housing properties for $153.6 mil)
In a Monday report, analysts Derek Chang and Vikrant Pandey note that the sale price of 12 billion yen (approximately $153.6 million) represents a 16.1% premium to the value of the assets at 10.3 billion yen, and that the assets were sold for an estimated net gain of 831 million yen.
They also highlight that the transaction is in line with the trust management’s asset recycling strategy in monetising assets for redeployment into higher-yielding properties.
“On a pro-forma basis, distribution per unit (DPU) is expected to decline by 3.1% post transaction. Aggregate leverage is estimated to dip 20bps to 39.6% from 39.8%, assuming that net sales proceeds of $10.6 million are fully deployed toward debt reduction,” comment Chang and Pandey.
“Management had previously highlighted the likelihood of footprint expansion in the US. In Europe, we note that the sponsor, Ascott Limited, has been acquiring assets in Germany and Paris, which we reckon could require 6-9 months to see performance stabilise before potential injection of these assets into ART,” they add.
As at 12:06pm, units of ART are trading flat at $1.09.
