Ascott Residence Trust’s (ART) 3Q18 results were within expectations with 9M18 DPU coming up to 73.4% of our full-year forecast. Revenue increased 6.0% YoY to S$134.5m on the back of additional revenue of S$6.2m from acquisitions (Ascott Orchard Singapore and DoubleTree by Hilton Hotel NY), S$3.6m higher revenue from existing properties, partially offset by a S$2.2m decrease as a result of divestments. As a result, gross profit increased 9.2% YoY to S$64.1m.

3Q18 portfolio RevPAU increased 8% YoY to S$158. Notably, Singapore clocked a 19% RevPAU increase due to higher market demand and higher ADR as revenue in 3Q17 was affected by a long stay project group with lower ADR.

In China, RevPAU in SGD terms increased by 14% due to the divestment of Citadines Gaoxin Xi’an and Citadines Biyun Shanghai, which had lower RevPAU as compared to the other properties in China. Excluding the divested properties, China RevPAU increased closer to 3% YoY.

Meanwhile, United Kingdom and Philippines RevPAU (SGD terms) grew 7% and 8% YoY respectively while the other geographies each posted a <5% increase in RevPAR. All-in-all, 3Q18 DPU increased 7.7% to 1.82 S cents.

Since our Sell call on 25 Jul, ART’s share price has corrected 7%. Given the share price decline and pending further details, we place our Sell rating and fair value of S$1.00 under review.

Source: OCBC Research - 1 Nov 2018