Ascott Residence Trust

OCBC on 30 Jul 2012

Ascott Residence Trust (ART) registered 2Q12 revenue of S$78.9m, up 8% YoY, and gross profit of S$42.7m, up 4% YoY. Revenue per Available Unit (RevPAU) for the portfolio climbed 6% YoY to S$156. Strong performances in the UK, Philippines and China helped to offset some weakness in France and Singapore. The Olympics will provide a boost for the London properties for three weeks in 3Q12, with management seeing occupancies of 85% and average room rates increase of 25%. 1H12 DPU of 4.52 S-cents was better-than-expected, forming 53% of our initial FY12 projection. We raise our FY12 DPU projection from 8.6 S-cents to 9.1 S-cents. We maintain BUY and raise our RNAV-based fair value estimate from S$1.23 to S$1.34.

1H12 DPU in line
ART registered 2Q12 revenue of S$78.9m, up 8% YoY, and gross profit of S$42.7m, up 4% YoY. Revenue growth was chiefly due to contributions from Citadines Shinjuku Tokyo and Citadines Karasuma-Gojo Kyoto as well as better performance from the serviced residences in UK, the Philippines and China. 2Q12 DPU climbed 2% YoY to 2.38 S-cents. 1H12 DPU of 4.52 S-cents was better-than-expected, forming 53% of our initial FY12 projection. We raise our FY12 DPU projection from 8.6 S-cents to 9.1 S-cents. The value of the investment properties as of 30 Jun was S$2.9b, up 2.5% versus the last valuation on 31 Dec.

UK, Philippines and China performed well
Revenue per Available Unit (RevPAU) for the portfolio climbed 6% YoY to S$156. In London, good response to the rebranded Citadines Prestige Trafalgar Square London helped ART achieve better rental yields. In the Philippines, ART saw stronger demand from business process outsourcing, O&G and aircraft engineering. The properties in China are experiencing more business from projects and relocations. These three countries helped to offset the weakness in France and Singapore. Singapore saw gross profit declined 5% QoQ to S$7.1m due to disruption from construction activities near to Somerset Grand Cairnhill and higher property tax and operational expenses. The Olympics will provide a boost for the London properties for three weeks in 3Q12, with management seeing occupancies of 85% and average room rates increase of 25%.

Approval for Cairnhill sale
Close to 100% of shareholders voted in favour of the four inter-conditional transactions involving the sale of Somerset Grand Cairnhill, the purchases of Ascott Guangzhou and Ascott Raffles Place, and a put and call option on a new Cairnhill serviced residence scheduled to be completed in 2015. We have already incorporated the first three transactions into our model. We maintain BUY and raise our RNAV-based fair value estimate from S$1.23 to S$1.34.