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Sunday, March 28, 2021

Ascott Residence Trust Review @ 28 March 2021

Basic Profile & Key Statistics

Ascott Residence Trust (ART) is a stapled group that invests in serviced residences, hotels, rental housing properties and currently owns 86 properties across 15 countries.

Performance Review

Gross revenue, gross profit, income available for distribution and DPU decreased YoY by 39%, 53% 32% and 52% respectively. Distribution in 2H included S$40 million of partial distribution from divestment.
REVPAU dropped across all countries with China being the least and UK being the worst.
ART has completed the acquisition of Student Accommodation -  Signature West Midtown in U.S. on 27 February 2021, which is expected to be 4.4% accretive to DPU.

Lease Profile

  • Income in SGD/Major Currencies is slightly low at 77.6%
  • WALE is long at 7 years
  • Highest lease expiry within 5 years is slightly low at 26% which falls in 2023.
  • Weighted average land lease expiry is long at 81.99 years


Debt Profile

  • Gearing ratio is moderate at 36.3%
  • Cost of debt is low at 1.8%
  • Fixed rate debt % is moderate at 79%
  • Unsecured debt % is slightly low at 69.8%
  • WADM is moderate at 2.9 years 
  • Highest debt maturity within 5 years is moderate at 31% which falls in 2022
  • Interest coverage ratio is low at 2.2 times
  • Preferred/Perpetual Securities over Debts is slightly high at 13.9%


Diversification Profile

  • Top geographical contribution is low at 9.4%
  • Top property contribution is low at 4.1%
  • Top 5 properties contribution is low at 18%
  • Top tenant contribution is slightly high at 12.8% 
  • Top 10 tenants contribution is low at 27.6% 
  • Top 3 countries contribution is from Australia, Japan and China which contribute close to 1/2 of GRI. 

Key Financial Metrics

  • Property yield is low at 2.2%
  • Management fees over distribution is high at 26.7% in which unitholders receive S$ 3.75 for every dollar paid 
  • Distribution on capital is low at 1.4%
  • Distribution margin is low at 13.3% 
  • 47.8% of the past 4 quarters distribution is from partial proceeds of divestment

Trends

  • Flat - Interest Coverage Ratio
  • Slight Downtrend - NAV per Unit
  • Downtrend - DPU, Property Yield, Distribution on Capital, Distribution Margin


Relative Valuation

  • Dividend Yield - Past 4 quarters DPU @ 3.04 cents / average yield @ 6.31% = S$ 0.48
  • Price/NAV - NAV @ S$ 1.15 x average P/NAV @ 0.89 = S$ 1.02


Author's Opinion


 Favorable Less Favorable
Long WALELow Interest Coverage Ratio
Long Weighted Average Land Lease ExpiryLow Property Yield
Low Cost of DebtNon Competitive Management Fees
Low Top Geographical ContributionLow Distribution on Capital
Low Top Property & Top 5 Properties ContributionsLow Distribution Margin
Low Top 10 Tenants ContributionHigh Distribution from Asset Disposal
 DPU Downtrend
 Property Yield Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

It is unfortunate that the COVID-19 pandemic came shortly after the merger with Ascendas Hospitality Trust, therefore unitholders are unable to see the benefits of the merger. ART performance should slowly be recovered as vaccination started in multiple countries. For FY2020, ART distributed S$ 45 mil of distribution from divestment, which accounts for 47.8% of FY2020 DPU.


For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF or SREITs Data Excel

REIT Investing Community - Facebook Group where members share and discuss REIT topic


*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a 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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