Friday, June 26, 2015

Ascott Residence Trust

Ascott Residence Trust (ART): Announced the proposed acquisition of 7 assets, comprising serviced residences and rental housing properties in Australia and Japan for a total of $298.3m. ART raised $250m via perpetual securities on 23 June and $136.9m debt will be raised.

Management guided for a 2.9% accretion in DPU with a blended EBITDA yield of 5.1%. As trading yield stands at 7%, the leverage effect makes it yield accretive.

Headline gearing is expected to increase only 1 ppt from 38.5% to 39.5% despite a 10.3% increase in aggregate leverage. However, if we classify the S$401m perpetual securities as half debt and half equity owing to the hybrid characteristics between these 2 classes, it would result in a gearing of 44.2%, which is on the high side relative to peers.

UOB Kay Hian has downgraded its rating to HOLD as there is limited upside from current share price, with an unchanged TP: $1.42, based on DDM (required rate of return: 8.3%, terminal growth: 2.0%). The house maintains its target price as the 2.9% accretion in DPU is offset by the raised risk profile from the relatively higher debt levels.

1 comment:

  1. The apartments are designed referring western style building construction with open floor space.sober living

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