Ascott Residence Trust

Ascott Residence Trust: Muted 2Q13 results. Although unitholders’ distribution jumped 14% y/y to $30.9m, this was mainly due to a reversal of over-provision of prior years’ tax expense of $2.7m, and lower finance costs. DPU grew 3% to 2.45¢, due to new placement units issued in 1Q13. Revenue declined 2% y/y to $77.4m, while gross profit dipped 4% to $40.9m, as revenue per available unit (RevPAR) dropped 9% to $142/day, due to lower contribution from the Reit’s existing properties in China, Vietnam, Singapore and Japan (arising from the depreciation of JPY against SGD), and following the divestment of two higher yielding properties in Melbourne and Singapore in 2012. During the quarter, Ascott continued to grow its portfolio, successfully deploying the $150m raised through an equity placement completed in Feb ’13, by acquiring 3 prime serviced residences in China and 11 rental housing properties in Japan. This added 1,576 apt units and lifted Ascott’s asset size by 14% to $3.2b. The group will invest a further ~$50m to refurbish 9 properties in 2013-14, to capture revenue growth when market conditions improve. Meanwhile, ongoing refurbishment of 3 properties in Jakarta, Brussels and Shanghai is expected to be completed in 2013, and another 3 properties in Perth, Barcelona and Paris are expected to be fully renovated in 2014. Mgt will continue to actively look for accretive acquisitions in key gateway cities in Asia, London , Paris and key cities in Germany. It expects FY13 operating performance to remain profitable, while assuring that the impact of the depreciating yen against the SGD is less significant, given the Reit’s geographically diversified portfolio. Ascott ended 2Q13 with gearing of 40.2% with average cost of debt of 3.1% pa. NAV of $1.36 translates to a valuation of 0.97x P/B. The Reit offers annualized 2Q13 yield of 7.45%, based on the last close at $1.315.