Ascott Residence Trust

Ascott Residence Trust: While 3Q14 distributable income rose 8% y/y to $32.3m, Ascott Residence Trust's (ART) DPU fell 11% y/y to 2.11¢, as a result of its 1-for-5 rights issue in Dec '13. Both revenue and gross profit grew 9% to $93.7m and $48.8m, respectively, driven by addition contribution from properties acquire in 2014, partially offset by absence of revenue from Somerset Grand Fortune Garden Property in Beijing, arising from the ongoing strata sale of units. RevPAU (revenue per available unit) slipped 4% (-6.6% q/q) to $128, mainly due to weaker performance in Singapore and Vietnam properties and lower average daily rate from the China properties acquired in Aug '14. Aggregate leverage rose 3.6 ppt to 40%, while effective borrowing rate remained at 2.9% and weighted average debt to maturity of 3.8 years. While ART remains on the active lookout for accretive acquisitions in Asia Pacific and Europe, we do not rule out the possibility of additional equity fund raising, diluting unitholders further going forward. Asset enhancement initiatives for three properties in China- Somerset Xu Hui Shanghai, Somerset Olympic Tower Property Tianjin & Somerset Grand Central Dalian, and one in Vietnam (Somerset Ho Chi Minh City), remains on track for completion over the next four quarters. At $1.23, ART is valued at 0.91x P/B, with annualized 3Q14 yield of 6.9%. Latest broker ratings: OCBC maintains Buy with TP of $1.33 under review