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Buy. Ascott REIT is backed by strong interest from majority shareholders therefore they are unlikely to be at the mercy of the banks or capital markets during times of recession. Moreover, it has a well diversified portfolio which underpins resilience.
ALP REIT INVESTMENT CLUB
Ascott Residence Trust (A68U)
(12June2016) close price: S$ 1.14
12M-Target price: S$1.25
Distribution Yield: 7.01%
1.)Type of Reit: Hospitality Reit
2.) Number of property in the portfolio: Ascott Reit’s international portfolio comprises 89 properties with 11,321 units in 38 cities across 14 countries in the Americas, Asia Pacific and Europe.
3.) Countries that the business operates in:
4.) Top 5 properties that generates the highest revenue (Decreasing order):
Element New York Times Square West1 (USA) contributes 5.08%, Citadines Trafalgar Square London (UK) contributes 4.9%, Ascott Makati (Philippine) contributes 4.7%, Citadines Holborn-Covent Garden London (UK) contributes 4.3%, and Somerset Liang Court Property Singapore (Singapore) contributes 3.7% of the group total revenue.
5.) Weighted average lease expiry (WALE) profile:
6.) Debt maturity profile:
Out of the Group’s total borrowings, 14% falls due in 2016, 10% falls due in 2017, 12% falls due in 2018, 8% falls due in 2019 and the balance falls due after 2019.
7.) Challenges: As ART earns rental income in various currencies, a depreciation of any foreign currency against the SGD could negatively impact DPU. However, having a diversified portfolio, FX volatility has had a minimal impact on Ascott Residence Reit’s earnings historically. Investors would have to take note that 42.7% of the Reit’s master lease will be expired on 2017.
8.) Strengths: Diversified portfolio underpins resilience. Ascott Residence Reit resiliency and cashflow visibility also comes from having 40-50% of its income sourced from master leases and management contracts with minimum guaranteed income.
9.) Significant events: Ascott Reit issued a seven-year S$200.0 million fixed rate notes at 4.21% per annum. The Singapore dollar proceeds of the notes have subsequently been swapped into Euros at a fixed interest rate of 1.81% per annum.
11.) Recommendation: Buy. ART is backed by strong interest from majority shareholders therefore they are unlikely to be at the mercy of the banks or capital markets during times of recession. Moreover, it has a well- diversified portfolio which underpins resilience.
COMPILED BY: Chu Cehan
DISCLAMER: Readers should not rely solely on information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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