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PhillipCapital remains 'neutral' on Ascott Residence Trust perpetual securities following coupon rate reset

Felicia Tan
Felicia Tan • 2 min read
PhillipCapital remains 'neutral' on Ascott Residence Trust perpetual securities following coupon rate reset
PhillipCapital analyst Timothy Ang also recommends an “overweight” call on ART’s 3.07% perpetual bond, as “it looks interesting on the Ascott curve after resetting”.
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SINGAPORE (July 6): PhillipCapital analyst Timothy Ang has maintained his “neutral” call on Ascott Residence Trust (ART) following its June 29 announcement that the coupon rate for the ARTSP 4.68% fixed rate perpetual securities issued on June 30, 2015, has been reset to 3.07% per annum.

The next reset date will be on June 30, 2025, at the prevailing Swap Offer Rate (SOR) plus 2.5%.

On May 29, 2019, Ascott Residence Trust’s (ART) manager announced that it has decided not to redeem its 4.68% $250 million of perpetual securities on June 30, the first call date.


See: ART sets precedence with perpetual securities; other REITs could follow

“While COVID-19 heavily hit operations causing some lessees to file for bankruptcy, we note that ART’s liquidity covers operating expenses for [more than] 2 years and sponsorship to Ascott Limited (part of CapitaLand Group) provides better access to funding,” Ang writes in a note dated July 2.

Ang also recommends an “overweight” call on ART’s 3.07% perpetual bond, as “it looks interesting on the Ascott curve after resetting”.

“It offers a 12 basis points (bps) spread pick up to the ARTSP 3.88% perp callable 1344 days later and a modest yield to worst (YTW) senior-sub pick up of 70bps to the senior ARTSP 4.205% ‘22s,” he says.

The Singapore-listed trust has a portfolio of serviced apartments, business hotels, and rental housing across 15 countries and 88 properities after its merger with Ascendas Hospitality Trust, with a market capitalisation of $2.5 billion.

As at 4.17pm, units in Ascott Residence Trust are changing hands 2 cents higher, or 2.0% up, at $1.04.

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