Ascott Residence Trust

Ascott Residence Trust: EU master leases to underpin stability. Despite ongoing uncertainty in Europe, house believe that income from ART’s European assets would be underpinned by master leases arrangements in the 17 properties in France and two in Germany, which contributed a total of 26% of gross profit for 1Q12. In addition, mgt contracts with min. guaranteed income contributed an additional 12% of 1Q12 gross profit. In terms of asset values, 40% is in EU of which the bulk is spilt between France (21%) and the UK (15%). Note that about half of total French exposure fall in prime regions of core Paris. Similarly, in the UK, all four properties are in prime London locations. This being so, house believe their book values would be relatively resilient and unlikely to suffer long term capital value deterioration. With a strong yield of 7.9%, continue to see value in the share price. Also, an undemanding P/B ratio of 0.8x would translate to a reasonable margin of safety for bear case write-downs. House maintain BUY rating with an $1.14 fair value estimate.