CFA Society Singapore
SINGAPORE (July 21): CIMB says it is not impressed by Ascott Residence Trust’s 1H17’s operational numbers given flat y-o-y gross profit.
Even though there has been a y-o-y improvement in Europe, gross profit remained behind CIMB’s forecast.
And while 2Q17 DPU of 1.84 cents was ahead of its expectations, this was due to a one-off $11.9 million realised FX gain arising from the repayment of a foreign currency-denominated loan.
Also Ascott Residence recorded a revaluation surplus of $6 million, mostly from the higher valuation of properties in Vietnam and UK.
Nevertheless, CIMB expects a stronger 2H with the additions of DoubleTree Hilton NY and Ascott Orchard Singapore (AOS), which are expected to be completed in Aug and Oct respectively.
CIMB is also factoring in the divestments of the two Citadines properties in China, which are expected to be completed by end 17.
Together with the divestments in Japan, the brokerage estimates a total divestment gain of $65.5 million though the manager does not have concrete plans to distribute the gains back to unitholders at this point in time.
Hence, CIMB continues to see tepid DPU growth for Ascott Residence though it is lowering its beta to reflect ART’s bond-like stability, which clocks up its DDM-target price.
“Hold maintained with projected total returns of c.3%,” says CIMB who has a target price of $1.14.
Units in Ascott Residence are up 2 cents at $1.22.