SINGAPORE (Nov 11): DBS is maintaining a “buy” call on Ascendas Hospitality Trust (AH-Trust) with a target price of 84 cents.

Lead analyst Mervin Song notes that AH-Trust offers yield in excess of 7% and currently trades at 16% discount on its net asset value of 88 cents.

But not all is smooth sailing for AH-Trust though. The REIT faces headwinds from oversupply in the Singapore and Brisbane markets, as well as the strengthening Japanese Yen, notes Song.

However, Song believes AH-Trust can still deliver stable DPUs going forward, with higher earnings from a renegotiated management contract at its Osaka property, uplift from the refurbished Courtyard by Marriott North Ryde, and increase in tourist arrivals into Australia and Japan to boost demand for its properties.

AH-Trust is also in a good position to execute debt-funded acquisitions with its low gearing of 32%. Coupled with the appointment of former chairman and president of Starwood Hotels & Resorts (Asia Pacific Division) and deputy chairman and CEO of SDL Hotels International, Miguel Ko as chairman, this has enhanced the REIT’s ability to execute on non-organic opportunities, notes Song.

Units of AH-Trust are trading 1 cent lower at 74 cents.