SINGAPORE (June 19): DBS Group Research is maintaining its “buy” on Ascendas Hospitality Trust with a revised target price of 88 cents given its attractive yield and discount to book value.
“We believe at current level, Ascendas Hospitality offers a compelling yield in excess of 7% which is based on a 95% payout ratio,” says lead analyst Mervin Song in a Monday report, “In addition, the stock trades at a discount to its NAV per unit of 92 cents.”
Song says Ascendas Hospitality has often been mistaken as a Singapore-focused hospitality REIT when 87% of the trust’s FY17 NPI are sourced outside Singapore and contribution from its sole Singapore property is derived from a fixed rental income stream.
That is why Ascendas Hospitality’s share price has largely tracked the performance of other Singapore-focused hospitality REITs which is facing the challenge of an oversupplied market.
In fact, Ascendas Hospitality offers investors an opportunity to gain exposure to the growing Australia and Japanese hospitality markets at attractive valuations given it is in a strong financial position to pursue debt-funded acquisitions, says Song.
“We believe the ability to execute on non-organic opportunities is enhanced by having Mr Miguel Ko as Chairman of Ascendas Hospitality, says Song, “Mr Ko, who is currently the CEO of ASCHT’s sponsor, was formerly the Chairman and President of Starwoods Hotels & Resorts (Asia Pacific Division) and Deputy Chairman and CEO of CDL Hotels International.”
Given the better than expected FY17 results, DBS has raised its DCF-based TP to $0.88 from $0.84.
Units in Ascendas Hospitality are trading at 81 cents.
