Ascendas Hospitality Trust

Ascendas Hospitality Trust (S$0.675): Strong FX headwinds in 2QFY16

Ascendas Hospitality Trust’s (AHT) 2QFY16 DPU rose 8.7% y/y to 1.38¢ on a distributable income of $16.3m (+15.1%), which includes partial proceeds from divestment of Pullman Cairns International ($0.6m).

Stripping out the divestment proceeds and working capital retention, distributable income grew 9.6% to $15.5m due to absence of a $2.1m fair value loss on cross currency swap.

Gross revenue and NPI ceded to $54.5m (-6.1%) and $22.6m (-2.9%) respectively, as an overall improvement in the trust’s hotel portfolio was doused by depreciation of AUD and JPY against the SGD during the quarter.

Setting aside FX impact, Australia portfolio fared better, with a higher RevPAR of A$142 (+4.4%), albeit a slight dip in occupancy 83.4% (-0.9ppt), largely bolstered by robust demand for hotels in Sydney and Melbourne, as well as Courtyard by Marriott North Ryde benefitting from the closure of a competitor.

China portfolio remained resilient as RevPAR ticked up to Rmb358 (+0.3%), underpinned by cost control measures, despite tougher competition and softer corporate demand for Beijing hotels.

Meanwhile, Japan portfolio recorded a solid performance, mainly driven by Oakwood Apartments which saw RevPAR jumping 21.7% to ¥9,861.

Aggregate leverage for the trust shrank marginally to 37.5% (-0.5ppt q/q), with average cost of debt at 3.3%, while average debt tenor shortened to 2.5 years (-0.3 years).

AHT is currently trading at 0.94x P/B and offers an annualised 1HFY16 yield of 7.7% excluding divestment payout.