SINGAPORE (July 22): OCBC Investment Research is keeping its “buy” recommendation on Ascott Residence Trust (ART), but trimming its fair value estimate to $1.24, from $1.29 previously.
OCBC lead analyst Andy Wong Teck Ching on Thursday said the lower fair value was “to take into account the increased uncertainties on the operating landscape and weaker business sentiment caused by the Brexit vote”.
Manager Ascott Residence Trust Management Limited (ARTML) noted in its SGX filing on Wednesday that Ascott REIT’s portfolio in Europe is well diversified across the UK, France, Germany, Belgium and Spain, with UK properties forming only 10.2% of Ascott REIT’s total gross profit for 1H16.
It added that the REIT’s UK properties are on management contracts with a minimum guaranteed income, giving Ascott REIT a stable income despite the uncertainty surrounding Brexit.
(See Ascott Residence Trust’s 2Q DPU rises 2% to 2.09 cents on acquisitions)
“While there are uncertainties over corporate accounts over the longer-term, leisure travel to the UK may increase as a result of the weaker GBP,” Wong says, noting that Ascott REIT’s UK operational performance “remains stable for now”.
ART posted a 2% rise in distribution per unit (DPU) of 2.13 cents for the 2Q16 ended June compared to 2.09 cents in the same period of last year.
But Wong says ART’s DPU increase was due to “a one-off realised exchange gain of $3.5 million arising from repayment of foreign currency bank loans with the divestment proceeds from Fortune Garden Apartments”.
“Excluding this, adjusted DPU came in at 1.91 cents, which was a dip of 8.6% and was slightly short of our expectations,” he adds.
As at 3.34pm, units of Ascott Residence Trust is trading 0.4% higher at $1.17.
