Ascendas Hospitality Trust

Ascendas Hospitality Trust: 2QFY13 results. Revenue at $38.1m appears broadly in line. DPU at 1.26cts (adjusted for sponsor give-up) was 2.2% higher than Nomura’s forecast, largely owing to better than expected NPI margins of 33.2%, vs 31.2% expectations, likely as Accor’s take over as operator appears to have led to cost synergies. Mgt has guided that these savings arose in part due to operating cost reductions directly attributable to the change of operator. If so, the improved margins could be sustainable and potentially be a short term catalyst for positive earnings revisions. ASHT’s Australia portfolio performance was mixed, with improved NPI margins and higher occupancy rates (84.3%) compensating for a lower than expected avg room rate of A$168. Nomura notes ~A$20m of the planned A$30m has been spent, with AEI works on track for completion by Aug ’13. believes that the effects of these works have yet to accrue and there could be further upside for portfolio performance (eg. higher RevPAR) in subsequent quarters. Keeps at Buy with TP $1.03.