Ascott REIT good for stable income growth, but lacks catalysts: CGS-CIMB

Ascott REIT good for stable income growth, but lacks catalysts: CGS-CIMB

Michelle Zhu
02/11/18, 12:23 pm

SINGAPORE (Nov 2): CGS-CIMB Securities continues to rate Ascott Residence Trust (Ascott REIT) at “hold” at an unchanged $1.12 target price on limited re-rating catalysts, after the trust’s latest 9M DPU of 5.01 cents came in line with expectations.

To recap, the decline 9M DPU was due to the absence of higher forex gains which were realised in the previous year. Ascott REIT’s DPU for the 3Q ended Sept grew 8% on-year to 1.82 cents due to revenue growth which was underpinned by additional revenue from newly-acquired property assets, as well as higher revenue from existing properties.  

In a Thursday report, analyst Eing Kar Mei says she views Ascott REIT as a well-diversified trust where weaker markets are usually compensated by the stronger markets, and vice versa. She also sees the trust as a source of “stable but slow income growth”.

Commenting on Ascott REIT’s performance over 9M18, she notes that strong revenue contributions from master leases have helped to offset weaker management contracts, which were most evident in China, Japan, the Philippines and Vietnam.

The declines from these countries were partially offset by better performance in Singapore and the US.

“Singapore performance was boosted by the lower base effect in 3Q17 as revenue was affected by a long stay project group with a lower average daily rate while US was driven by the contribution from the acquisition of DoubleTree Hilton Hotel New York (acquired in 16 Aug 2017), higher revenue from the refurbished apartments at Sheraton Tribeca New York and improved conditions in New York,” says Eing.

Units in Ascott REIT were trading 1 cent higher at $1.06, or 0.87 times FY18F book, ahead of the midday trading break.

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