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Saturday, August 22, 2020

Ascott Residence Trust Analysis @ 22 August 2020

Basic Profile & Key Statistics

Ascott Residence Trust is a stapled group which comprises of Ascott Real Estate Investment Trust (Ascott Reit) and Ascott Business Trust (Ascott BT). ART invests in serviced residences, hotels, rental housing properties. 


Lease Profile

1H REVPAU of S$70 refer to those properties under management contract and management contract with a minimum guaranteed income. WALE (for master lease) is long at 7.5 years, which is normal for hospitality trust. 42.4% of its master lease expired in the year 2025 and beyond, no detailed breakdown is provided. 75.6% of its income is received in SGD and major currencies. Weighted average land lease expiry is long at 77.42 years.


Debt Profile

Gearing ratio is healthy at 36.1%. Cost of debt is low at 1.8%. Fixed-rate debt % is moderate eat 80%. Unsecured debt % is slightly low at 70.3%. Interest cover ratio is slightly low at 3.6 times. WADE is long at 3.1 years where the highest debt maturity of 31% falls in the year 2022.


Diversification Profile

Besides top 10 tenants contribution, there is no detail on its top geographical, top property, and top tenant weightage after ART merger with Ascendas Hospitality Trust. We could only review base on pre-merger information. Top geographical and top property contributions are low at 20.9% and 8.1%. Top tenant contribution is high at 11.5% while top 10 tenants contribution is low at 28%. 


Key Financial Metrics

Property yield is low at 3.8%. ART retain S$ 5 mils from distribution, therefore affected management fees over distribution, distribution on capital, and distribution margin, the values are 20.6%, 2.4%, and 21.3% respectively. Without retention, the values are still low at 19.8%, 2.5%, and 22.3% respectively. 18.2% of the past 4 quarters distribution is from partial distribution from divestment gain.


Related Parties Shareholding

As compared to SREITs median, sponsor and manager holding higher stake while directors of manager holding lesser stake.


Trend

DPU is fluctuating, which is normal for hospitality trust, where generally 4Q is traveling peak season while 1Q is non-peak. Looking at pre-merger, DPU and NAV per unit are on a slight downtrend but improved in 2019 while distribution margin maintains more or less the same.


Relative Valuation

i) Average Dividend Yield  - As per DPU, the quarter average dividend yield is fluctuating as well for the same reason. Average yield at 6.28%, apply the past 4 quarters DPU of 5.23 cents will get S$ 0.83. If we consider without retention, DPU would be 5.39 cents which translates into S$ 0.86.

ii) Average Price/NAV - Average value is at 0.91, apply the latest NAV of S$ 1.23 will get S$ 1.12.


Author's Opinion

FavorableLess Favorable
WALETop Tenant Weightage
Weighted Average Land Lease ExpiryProperty Yield
Cost of DebtManagement Fee
WADEDistribution on Capital
Top Geographical WeightageDistribution Margin
Top Property WeightageDistribution from Asset Disposal
Top 10 Tenants Weightage

COVID has greatly impacted performance on all the hospitality trust, which we could see from ART latest result. ART management is active in capital recycling which divests properties at gain and acquires new properties and subsequently, ART could choose to use those gains for distribution top-up. Although short term headwind remains, but with multiple vaccines are under trial phase and more countries selectively open borders , ART performance is likely to get better.


The above analysis information is extracted from SREITs Dashboard, you are welcome to use the information there for your analysis. You could also refer SREITs Data for an overview of Singapore REITs. If you like my sharing, please join the Facebook group - REIT Investing Community where you could read, share, and discuss REITs related topics. Please also invite your like-minded friends to the group.


*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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