SINGAPORE (Oct 25): DBS is maintaining its “hold” call on Ascott Residence Trust even as the hospitality trust reaps the rewards of diversification and posted 3Q17 results that came within expectations.
To recap, ART’s 3Q revenue rose 2.4% to $126.9 million or 25% of DBS’ full-year forecast, mainly due to the additional revenue of $4.9 million from the acquisitions of DoubleTree by Hilton Hotel New York and two services residences in Germany.
On a same store basis, revenue remained flat y-o-y. DPU fell 28% y-o-y to 1.69 cents, mainly due to the enlarged unit base after the rights issue launched back in March.
Markets such as Singapore, Japan, and US continue to face headwinds such as an oversupply of accommodation and weaker corporate demand. Singapore RevPAU fell 10% y-o-y in 3Q17 while Japan RevPAU registered a 13% decline.
In a Wednesday report, analyst Deborah Ng says, “Despite the challenges, due to the substantial diversification of the portfolio, the decrease in 3Q17 RevPAU on a portfolio basis for assets on management contracts was limited at 1%.”
In terms of the best-performing markets, Belgium, Spain, and the United Kingdom have posted y-o-y increases of 43%, 8%, and 5% in RevPAU respectively during the quarter.
3Q17 RevPAU growth for the Philippines and Vietnam was also positive, boosted by the recent apartment refurbishments.
As at end Sept, ART’s gearing decreased to 31.9% from 32.4% at end June.
While Ng expects finance costs to increase next quarter given the completion of Ascott Orchard Singapore on Oct 10, she has adjusted the full-year finance costs downwards to account for the refinancing of bank loans at lower interest rates and repayment of bank loans with the rights issue and divestment proceeds.
“Do note that our FY17F DPU forecast figure excludes the realised exchange gain of $11.9 million. If we include those one-offs, our FY17F DPU would increase from 6.3 cents to 6.8 cents,” says Ng.
“We look forward to the contributions from Ascott Orchard Singapore, though we do not find current unit prices compelling,” she adds.
Units in ART are trading 1 cent lower at $1.21 with 5.2% yield for FY17.
