• 3Q within expectations
• Healthier prospects for portfolio
• FV up from S$1.00 to S$1.03

In-line Set of Results With DPU Up 7.7% YoY

Ascott Residence Trust’s (ART) 3Q18 results were within expectations with 9M18 DPU coming up to 73.4% of our initial 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. All-in-all, 3Q18 DPU increased 7.7% to 1.82 S cents.

Stellar Double-digit RevPAU Growth in Singapore!

3Q18 portfolio RevPAU increased 8% YoY to S$158. Notably, Singapore clocked a 19% RevPAU increase to S$217, due to higher market demand (both corporate and leisure) and higher ADR as revenue in 3Q17 was affected by a long stay project group with lower ADR. We highlight that this is the highest SG RevPAU since 3Q15.

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 RevPAU.

Generally More Optimistic Outlook

The latest set of results suggests a more optimistic outlook for many of the geographies within ART’s portfolio, and we make upward adjustments to our forecasts accordingly. After adjustments, our fair value increases from S$1.00 to S$1.03.

We continue to like ART’s portfolio of assets with its strong brand recognition and high geographical diversification. Gearing stands at a reasonable rate of 36.4% as at 30 Sept 2018, with ~82% of ART’s total borrowings on fixed interest rates.

ART is currently trading at a 6.5% FY19F dividend yield. Since our Sell call on 25 Jul, ART’s share price has corrected 7% to yesterday’s close.

Given the share price decline, we upgrade ART from Sell to HOLD with a fair value of S$1.03.

Source: OCBC Research - 2 Nov 2018