Friday, January 29, 2016

Ascenda Hospitality Trust

Ascenda Hospitality Trust’s 3QFY16 DPU of 1.45¢ (+11.5% y/y) rose in tandem with distributable income of $16.2m (+12%). This brought 9MFY16 DPU to 4.11¢ (+7.9%).

The higher distributable income was attributed to the absence of unwinding costs for FX swaps ($2.9m), and buttressed by partial proceeds from divestment of Pullman Cairns Int’l Hotel ($0.7m) in Jun '15.

Gross revenue and NPI fell to $54.9m (-9.5%) and $23.4m (-9.3%) suffered from the loss of income from Pullman Cairns Int'l, lower contribution from Pullman and Mercure Brisbane King George Square hotel, and compounded by the weaker AUD.

The Australian portfolio was hurt by a 2.9ppt drop in average occupancy rate to 84.4%, and a 5% decline in RevPAR to A$153, as the Brisbane market was undermined by increased hotel room supply, and high base in 3QFY15 when the city hosted the G20 Summit.

Meanwhile, hotels in China improved, with average occupancy rate edging up 2.2ppt to 82%, and RevPAR climbing 4% to Rmb337, as efforts to develop new corporate accounts and other differentiated promotions with travel agents appear to be paying off.

Portfolio in Japan also remained solid, with RevPAR surging 24.7% to ¥10,687, driven by strong performance at Oakwood Apartments, aided by a stronger JPY against SGD.

Aggregate leverage crept up 0.7ppt q/q to 38.2%, and average debt cost added 0.1ppt to 3.4%, while average debt tenor shortened to 2.3 years (2QFY16: 2.5 years).

Looking ahead, management remains positive on the tourism sector in Japan and Australia, except for Brisbane, but less optimistic on China amid the slowing economy and pollution issue in Beijing.

As for Singapore, the trust expects the on-going recovery in tourist arrivals to persist, but the increasing supply of hotel rooms may moderate the sector’s performance.

Outlook aside, management is also in process of evaluating the unsolicited takeover interest from an unnamed buyer.

Ascendas Hospitality Trust is currently trading at 1.08x P/B, and offers a 3QFY16 annualised distribution yield of 7.7%.

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