Ascendas H Trust

Ascendas H Trust: According to mgmt, the timing of its Park Hotel acquisition and subsequent equity raising exercise in hindsight could have been better. Recent macroeconomic uncertainties, coupled with the spike in global interest rates, have placed downward pressure on REITs’ valuations and dampened investment appetite. Nomura think that macro concerns will likely persist in the short term and would likely outweigh stock-specific factors and expect share price to remain volatile in the near term. Management indicated that the A$30m asset enhancement initiatives (AEI) on the Australia (AU) portfolio continue to progress as planned, although the uplift to RevPAR has yet to materialize. The trust’s master-leased hotel (Ariake Sunroute) in Japan has been impacted negatively by the much weakened yen. Book value has taken a hit of 17%, down to $210.7m. Whilst the manager has entered into forward contracts to hedge distributions, the asset value of the hotel remains un-hedged and could thus face further downside risk should the yen continue to depreciate. Since 2 May, the stock price has adjusted down to $0.87 from $1.02. At current levels, Ascendas H Trust is trading at a FY14F DPU yield of 7.2%, implying a trading discount of 0.6% to CDL Hospitality vs. a historical average discount of 1.6%. Nomura has a NEUTRAL rating with TP of $0.92.