Ascott Residence Trust (ART) announced FY11 distributable income of S$96.2m, was up 67% YoY, and was mostly in line with our full year forecast of S$99.1m. In terms of DPU, FY11 DPU came in at 8.53 S-cts versus 7.54 S-cts in FY10 - a 13% YoY increase. Despite solid execution by management and currently healthy performance, we are cognizant of possibly drawn-out macro economic uncertainties in Europe and raise our capitalization rate assumptions marginally by 30-50 bp for ART’s European assets (40.8% of assets as of end 2011, ex. cash). This being so, our fair value estimate is lowered to S$0.98. Including a 12m dividend forecast of 8.4 S-cents, implied 12m total return is 5.9% and hence we downgrade our rating to a HOLD. We would turn buyers at S$0.96.
FY11 results within expectations
Ascott Residence Trust (ART) announced FY11 distributable income of S$96.2m, which was up 67% YoY. This was mostly in line with our full year forecast of S$99.1m. In terms of DPU, FY11 DPU came in at 8.53 S-cents versus 7.54 S-cents in FY10 - a 13% YoY increase. Full year top-line was S$288.7m, up 39% mostly due to the contributions from the 28 serviced residences acquired Oct 10, partially offset by the Ascott Beijing and Country Woods divestments. A net revaluation gain of S$47.4m was also recognized for properties in the portfolio, with gains from serviced residences in Japan, France, China and Singapore, and lower valuations in Vietnam.
Performance generally healthy across portfolio
We continue to see healthy numbers across the ART’s portfolio, with the exception of Belgium, Vietnam and Japan. In Belgium, we saw the impact of a delay in the renovation of Citadines Sainte-Catherine, while Vietnamese operations were affected by the weakening of the USD against the SGD, reductions in corporate accommodation budgets and an increased supply of serviced residences in that market. In Japan, the Mar 11 earthquake and tsunami had impacted earnings. Average REVPAR for the portfolio increased by 10% from S$130/day to S$143, driven mainly by the performance of the Singapore and UK properties.
European uncertainties to bear; downgrade to HOLD
Despite solid execution by management and currently healthy performance, we are cognizant of possibly drawn-out macro economic uncertainties in Europe and raise our capitalization rate assumptions marginally by 30-50 bp for ART’s European assets (40.8% of assets as of end 2011, ex. cash). This being so, our fair value estimate is lowered to S$0.98. Including a 12m dividend forecast of 8.4 S-cents, implied 12m total return is 5.9% and hence we downgrade our rating to a HOLD. We would turn buyers at S$0.96.
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