Ascendas Hospitality Trust

Ascendas Hospitality Trust (AH Trust): Nomura initiates at Buy with TP $1.03. Notes with 9 out of 10 of its hotels under managed contracts, AH Trust has only ~7% of its revenues fixed for FY13/14e,. This should allow it to tap into the anticipated RevPAR (revenue per available room) growth, driven by i) favorable supply conditions in Sydney (~38% of FY14e NPI), ii) an A$30m AEI boost to its AU hotel portfolio, and iii) a change of operator to Accor, the largest hotel operator in Asia Pac. Estimates that every 5% change in RevPAR would change NPI (net property income) by 7.5% and distributable income by 10.4%. The house sees short term catalysts in portfolio enhancements, and medium catalysts in acquisitions, supported by the trust’s debt headroom of $81m and sizeable potential pipeline of acquisitions from its strategic partner, Accor. Nomura notes AH Trust’s valuation has room for expansion, as it trades at FY13/14 yield of 7.9 – 8.0%, vs S-Reits at 6.0 – 6.2% and CDLH Trust (closest peer) at 5.5%.