• 4Q13 in-line with expectations
• Acquisitions probably in Asia
• Maintain BUY

No surprises in 4Q13

ART announced 4Q13 results that were inline with ours and the street’s expectations. Revenue climbed 11% YoY to S$83.9m, chiefly due to additional revenue of S$8.3m from the properties acquired in Nov 2012 and on 28 Jun 2013, and better performances from properties in Belgium and France. The increases were partially offset by lower contribution from properties in the Philippines and Japan (weak yen). Gross profit rose 8% YoY to S$41.6m. Unitholders' distribution increased 15% YoY to S$26.3m. DPU fell 34% YoY to 1.33 S cents due to the Dec 2013 rights issue. Excluding the rights issue, the DPU would be at 1.96 S cents, down 2% YoY.

Outlook for 2014

Management is of the view that on a samestore basis, Singapore SRs will do slightly better than last year, with good occupancies supporting possible ADR increases. However, management notes that the Singapore hospitality sector as a whole will be affected by the new hotel room supply due to come onboard in 2014 and 2015. ART’s properties in Indonesia and Australia which have recently finished renovations should see positive contributions going forward. The key area of concern is still Vietnam, although management believes that the performance of its Vietnam’s properties is bottoming out in local currency terms.

Acquisitions likely in 1H14

We believe that a possible upcoming announcement of acquisitions, e.g. the purchase of Asia-based assets, could serve as a positive price catalyst for ART. Management indicates that it is in advanced negotiations for acquisitions. We assume that around S$350m worth of property yielding ~5.5% will be acquired at the start of 2Q14; ART’s leverage will go back up to around 40%. ART has stated that it is looking for properties in the gateway cities of China, Japan, Malaysia, Australia and Europe. We believe that likely purchases would include Ascott Kuala Lumpur and properties in second-tier cities in China and Japan.

Maintain BUY

We maintain our FV of S$1.33 and BUY rating on ART.

Source: OCBC Research - 22 Jan 2014