Ascott Residence Trust (ART) has entered into conditional agreements to acquire three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for S$287.4m at an EBITDA yield of 5.4% on a pro forma basis for FY12. On a pro forma basis, these accretive acquisitions are expected to have increased FY12 distribution per unit by 2.9% from 8.76 S cents to 9.01 S cents. However, with the Japanese Yen currently ~22% weaker in SGD-terms versus the FY12 average, any accretion post-acquisition is likely to be lower. The acquisitions will be funded partly by the S$147.8m in net proceeds raised from the equity placement completed on 6 Feb and the balance will be funded by debt (including debt at the level of the SPVs). We maintain our FV of S$1.35 and HOLD rating on ART.
Pro-forma EBITDA yield of 5.4%
Ascott Residence Trust (ART) has entered into conditional agreements to acquire three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for S$287.4m at an EBITDA yield of 5.4% on a pro forma basis for FY12. The acquisitions, which are interested party transactions, will be funded partially by the S$147.8m in net proceeds raised from the equity placement completed on 6 Feb and the balance will be funded by debt (including debt at the level of the SPVs).
Increasing Asia exposure
Citadines Biyun Shanghai is located in the Jinqiao Export Processing Zone. Somerset Heping Shenyang and Citadines Xinghai Suzhou are ART's first properties in Shenyang and Suzhou respectively. The Japan properties are located in 6 cities and have good occupancy of >95%. 5 of the properties are under master leases of about 5-8 years, which will provide a degree of income stability. ART’s Asia portfolio will increase from 59% to 63% of its total asset value. Gearing will increase from 36% to 41%, and we believe that any further significant acquisitions would entail a degree of equity funding.
FX impact
On a pro forma basis, these acquisitions are expected to have been accretive, increasing FY12 distribution per unit by 2.9% from 8.76 S cents to 9.01 S cents. However, with the Japanese Yen currently ~22% weaker in SGD-terms versus the FY12 average, any accretion post-acquisition is likely to be lower. On the flip side, we think that cap rates in Japan could compress over FY13, partly mitigating the impact of JPY depreciation on property valuations in SGD-terms.
Maintain HOLD
We maintain our FV of S$1.35 and HOLD rating on ART.
Ascott Residence Trust (ART) has entered into conditional agreements to acquire three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for S$287.4m at an EBITDA yield of 5.4% on a pro forma basis for FY12. The acquisitions, which are interested party transactions, will be funded partially by the S$147.8m in net proceeds raised from the equity placement completed on 6 Feb and the balance will be funded by debt (including debt at the level of the SPVs).
Increasing Asia exposure
Citadines Biyun Shanghai is located in the Jinqiao Export Processing Zone. Somerset Heping Shenyang and Citadines Xinghai Suzhou are ART's first properties in Shenyang and Suzhou respectively. The Japan properties are located in 6 cities and have good occupancy of >95%. 5 of the properties are under master leases of about 5-8 years, which will provide a degree of income stability. ART’s Asia portfolio will increase from 59% to 63% of its total asset value. Gearing will increase from 36% to 41%, and we believe that any further significant acquisitions would entail a degree of equity funding.
FX impact
On a pro forma basis, these acquisitions are expected to have been accretive, increasing FY12 distribution per unit by 2.9% from 8.76 S cents to 9.01 S cents. However, with the Japanese Yen currently ~22% weaker in SGD-terms versus the FY12 average, any accretion post-acquisition is likely to be lower. On the flip side, we think that cap rates in Japan could compress over FY13, partly mitigating the impact of JPY depreciation on property valuations in SGD-terms.
Maintain HOLD
We maintain our FV of S$1.35 and HOLD rating on ART.
No comments:
Post a Comment