Wednesday, June 16, 2010

*Ascott REIT*

Maintain BUY. Grand opening of MBS on 23 June and the upcoming release of May visitor arrival numbers are potential catalysts for hospitality plays, in our view. Ascott Residence Trust (ART) should benefit from the increase in global travel and strong visitor arrivals in Singapore.

Separately, acquisitions in Vietnam are on the cards. The 206-unit Somerset Hoa Binh in Hanoi could be injected into ART in the next 12 months. Ascott also plans to double its serviced residence units in Vietnam to 1,800 in the next three years. Estimated to cost $142m, these would provide ART a good acquisition pipeline. With gearing at 42.1%, ART has debt headroom of about $250m for acquisitions before hitting its maximum target of 50%. ART has yield of 7% and total return of 28%.

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