Ascott Residence Trust (ART) reported its 2QFY19 results which met our expectations. 2QFY19 revenue saw a growth of 2% YoY, or S$2m to S$132.5m, driven by the acquisition of Citadines Connect Sydney Airport in May 2019 and higher revenue from the existing properties in the Philippines, UK and Japan.

Gross profit increased 7% YoY to S$67,6m on the back of higher revenue as well as new accounting standard FRS 116 with effect from 1 Jan 2019. Excluding the FRS 116 adjustments, 2QFY19 gross profit growth was flat (+S$0.2m).

DPU grew 8% YoY to 1.98 S cents. Excluding a one-off realised exchange gain arising from the repayment of foreign currency bank loans, 2QFY19 DPU was 1.84S cents which remained unchanged from 2QFY18, making up 26% of our full-year forecast.

According to management, the proposed combination of Ascott Reit and A-HTRUST has received positive support from the key unitholders and they will continue to engage the unitholders ahead of the Extraordinary General Meetings which will be held in Oct.

Retain HOLD, with an unchanged fair value estimate of S$1.31.

Source: OCBC Research - 31 Jul 2019