What is the news?

Ascott Residence Trust (ART) announced its 2Q15 financial results on 22 July after trading hours, and we attended the trust’s analyst briefing.

Analyst briefing key takeaways

Japan remains the primary revenue growth driver and is expected to continue so. Excluding the contribution from Citadines Central Shinjuku Tokyo (acquired in October 2014), same store RevPAU was up 16% y-o-y in the Japanese geographical segment. This was mainly due to stronger demand from the corporate and leisure sectors. We believe that the stronger performance was linked to the declining unemployment rate in the Japanese economy, which was 3.3% as at May 2015, one of the lowest in the past 18 years as Abenomics takes flight.

Acquisitions continue to diversify ART’s portfolio. Following the recent proposed acquisition of properties across Australia, Japan and the US, the trust’s total assets will not only rise to $4.6 billion, but will also add presence in the US market, lifting its portfolio reach to 14 countries around the world when completed.

Still on track to reach its target portfolio size. ART targets to reach an asset size of $6 billion by 2017. Assuming the completion of the proposed acquisitions , including a forward contract that was previously signed to acquire the serviced residence property at Cairnhill for $405 million (previously divested to CapitaLand for re-development), ART’s portfolio would have grown to $5 billion.

Investment Action

No stock rating or target price provided, as we do not have coverage on ART.

Source: Phillip Securities Research - 24 Jul 2015