SINGAPORE (Oct 2): OCBC Investment Research is keeping Ascott Residence Trust on “hold” with an unchanged fair value estimate of $1.10.
In its initial coverage, Fitch Ratings last week assigned ART a long-term issuer default rating (IDR) of ‘BBB’ with a stable outlook.
The rates ART well alongside peers such as CDL Hospitality Trusts (CDLHT, BBB-/Stable) and Mapletree Industrial Trust (MIT, BBB+/Stable).
See: Ascott Residence Trust gets 'BBB' rating for first time from Fitch
“We continue to be positive on the geographical diversification of ART’s portfolio and the support of a strong sponsor, but believe the REIT could trade at a more attractive yield,” says OCBC lead analyst Deborah Ong in a report on Friday.
According to Ong, ART’s sponsor The Ascott Limited has been actively expanding its serviced residence portfolio globally.
ART itself, too, has been adding to its portfolio.
The REIT in August completed its acquisition of DoubleTree by Hilton Hotel New York, and is expected to acquire Ascott Orchard Singapore next month.
See: Ascott Residence Trust completes acquisition of Doubletree by Hilton New York – Times Square South
Post the AOS acquisition, ART’s gearing is expected to rise to about 36%, from 32.4% as of end-June.
“ART's unencumbered assets/unsecured debt ratio stood at 2.9x, substantially higher than the 2.0x ratio Fitch has identified as the minimum level for investment grade real estate investment trusts to support strong financing flexibility and limit the subordination of unsecured creditors' interests,” Ong notes.
As at 11.37am, units in Ascott Residence Trust are trading 1 cent higher at $1.185, implying an expected FY17 dividend yield of 5.2%.
