Ascott Residence Trust Review @ 15 February 2022

 Basic Profile & Key Statistics

Ascott Residence Trust (ART) is a stapled group that invests in serviced residences, hotels, rental housing properties and currently owns 91 properties across 15 countries.

Performance Highlight

The performance of ART has improved YoY mainly due to higher revenue from the existing portfolio and contribution from newly acquired student accommodations and rental housing properties but partially offset the decrease in income due to divestment.

Revenue per Available Unit

REVPAU has recovered due to the easing of travel restrictions and gradual economic recovery.

Acquisition

In 2H FY21, ART completed the acquisition of 5 U.S. student accommodations. The Latitude at Kent is completed on 9 February 2022 as well. 

Development

2 developments are ongoing where Somerset serviced residence is expected to complete in 2H 2025 and the student accommodation is expected to complete in 2Q 2023.

The development of lyf one-north is completed and TOP obtained in Jan 2022. 96% occupancy was achieved during the first phase of opening.

Asset Enhancement Initiative

The refurbishment and rebranding of Hotel Central Times Square have been completed in Nov 2021, which is now launched as voco Times Square South.

Related Parties Shareholding

• REIT sponsor's shareholding is high at 31.892%
• REIT manager's shareholding is high at 6.969%
• Directors of REIT manager's shareholding is low at 0.04%

Lease Profile

• Income in SGD/Major Currencies is slightly low at 78%.
• WALE is long at 6 years
• Highest lease expiry within 5 years is low at 15% which falls in 2022 
• Weighted Average Land Lease Expiry is long at 80.99 years

Debt Profile

• Gearing ratio is moderate at 37.1%. Include perps, gearing is at 43.3%.
• Cost of debt is low at 1.6%
• Fixed rate debt % is moderate at 74%
• Unsecured debt % is low at 63.5%
• WADM is slightly short at 2.7 years
• Highest debt maturity within 5 years is low at 28% which falls in 2022
• Interest coverage ratio is low at 3.7 times
• Perpetual securities over debts is slightly high at 14.3%

Diversification Profile

• Top geographical contribution is low 9.4% 
• Top property contribution is low at 4.1% 
• Top 5 properties contribution is low at 18% 
• Top tenant contribution is moderate at 12.8% 
• Top 10 tenants contribution is low at 24.8%
• Top 3 countries contribution is from Australia, Japan and United States which contribute more than 50% of GRI. 

Key Financial Metrics

• Property yield is low at 2.6% 
• Management fees over distribution is high at 18% in which unitholders receive S$ 5.56 for every dollar paid 
• Distribution on capital is low at 2.1%
• Distribution margin is low at 23.4%
• 32.8% of the past 12 months DPU is from partial proceeds from divestment.

Trends

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

Relative Valuation

• P/NAV - Average for 1y & 3y; Below average for 5y
• Dividend Yield - Above average for 1y; Below average for 3y & 5y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	Low Directors of REIT Manager's Shareholding
High REIT Manager's Shareholding	Low Unsecured Debt %
Long WALE	Low Interest Coverage Ratio
Well Spread Lease Expiry	Low Property Yield
Long Weighted Average Land Lease Expiry	Non-Competitive Management Fees
Low Cost of Debt	Low Distribution on Capital
Well Spread Debt Maturity	Low Distribution Margin
Low Top Geographical Contribution	High Distribution from Asset Disposal
Low Top Property & Top 5 Properties Contributions	DPU Downtrend
Low Top 10 Tenants Contribution	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

ART performance has slowly recovered as more countries have eased the international travel restrictions. However, due to Omicron, some countries have implemented temporary restrictions starting December 2021. Next 1H should be a better period for ART due to full half yearly contribution from those newly acquired student accommodation as well as lyf one-north and voco Time Squares South. Do note that ART has distributed S$ 45 mil of divestment gain in FY 21 (same amount as FY20), which amount to 32.8% of FY21 distribution.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

And you could join the following to support my work:

Singapore REITs Post Telegram Channel - Join to receive posts for Singapore REITs

REIT-TIREMENT Patreon - Support my work and get exclusive contents

REIT-TIREMENT Facebook Page - Support by liking my Facebook Page

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 and 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.