Full Year Revenue Up 4% at Ascott Residence Trust

Ascott Residence Trust (SGX: A68U) announced its fourth quarter earnings this week. For the 12 months ended 31 Dec 2013, revenue and profit both improved but due to the increase in unit count because of a rights issue, the distribution per unit decreased 4% to 8.40 Singapore cents compared to a year ago

Ascott Residence Trust is a real estate investment trust that focuses on serviced residences. It has more than 80 properties located across 12 countries (including Singapore, Australia, China, United Kingdom, an Germany) under its belt and is sponsored by The Ascott Ltd, which is a wholly owned subsidiary of CapitaLand (SGX: C31).

In addition, the REIT is very diversified geographically, with no country accounting for more than 20% of its total assets.

Currently CapitaLand Group owns about 45% of the trust.

Business Model

Ascott Residence operates its serviced residences through 3 models: 1) Master Leases; 2) Management contracts with Minimum Guarantee; and 3) Management contracts.

There are 26 properties in its portfolio that’s managed under a master lease and they contributed 32% to its gross profit for the year.

There are only eight properties managed under the second model and it accounted for 19% of the REIT’s gross profit.

Lastly, the rest of the properties are managed through management contracts and they made up 49% of the REIT’s gross profit for the whole of last year.

2013 Performance

Ascott Residence’s annual revenue for 2013 improved by 4% year-on-year to S$316.6 million. During the year, the revenue per available units (RevPAU) declined by 9% as the trust divested one of its properties in Singapore, the Somerset Grand Cairnhill, which had an above average daily rate (ADR) and instead purchased three properties in China with lower ADRs.

Rights Issue

On 12 December 2013, Ascott Residence raised a total of S$ 253.75 million through a rights issue. This helped to strengthen the REIT’s balance sheet and prepare it for future acquisitions by reducing  its gearing (the ratio of total debt to total assets) from 40% to 34%.

Looking Forward

With its stronger balance sheet, the trust is currently looking for acquisitions mainly in China, Japan, Malaysia, Australia and Europe. Additionally, it will continue to add value to its assets through asset enhancement initiatives.

The REIT’s currently selling for 0.9 times book value at its current price of S$1.23 per unit.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.