Ascott Residential Trust: CS initiates coverage with Neutral rating, and TP of $1.30, implying a 12% total return. Note that while Reits earnings stability and investability have improved after its recent acquisition of 26 European serviced apartments, in the near term, the acquisition may have diluted some of the stronger growth in thriving markets like SG….
Believe that potentially up to $1 bn of assets in Tier 2-3 China cities, Singapore, Malaysia and India could be injected into REIT over the next 12 months, citing that a cash call could potentially be necessary if the acquisition value is >US$500m. Suggest that, should a cash call be required, this could provide a good entry opportunity….
Valuation appears fairly attractive with a FY11E 6.4% yield, compensating the lower single-digit growth outlook, and expect REIT to rerate if management divests non-performing assets.
However, for hospitality exposure, broker prefers CDLHT for better growth prospects.