Ascott Residence Trust's (ART) 2H20 results beat expectations. ART released SGD5m of distributable income retained in 1H20 and distributed a one-off partial divestment gain of SGD40m to mitigate the impact of Covid-19. As such, 2H20 DPU came in at 1.99 S cents (-52% YoY).

On a full-year basis, FY20 DPU was down 60% YoY to 3.03 S cents, above our expectations. ART also announced the expansion of its investment strategy to include student accommodation properties and the acquisition of Signature West Midtown, a freehold student accommodation in Atlanta, US. Total acquisition cost is ~SGD130.2m which will be financed through a mix of debt and divestment proceeds. The acquisition is expected to be DPU accretive with pro-forma FY20 DPU increasing by 4.4%.

We see the acquisition as a positive as it will pave the way to enhance ART’s long-term resilience and diversification. After adjustments, our fair value estimate increases from SGD1.20 to SGD1.24. BUY.

Source: OCBC Research - 29 Jan 2021