What Investors Need to Know About Ascott Residence Trust’s Latest Earnings

Ascott Residence Trust (SGX:A68U) released its third-quarter earnings report yesterday. The reporting period was from 1 July 2014 to 30 September 2014. Ascott Residence Trust is managed indirectly by a wholly-owned subsidiary of Capitaland Limited (SGX:C31). The REIT’s (real estate investment trust) property portfolio primarily covers serviced residences or rental housing properties. As of 16 October 2014, it had 90 properties with 10,503 apartment units in 37 cities.

Financial Highlights

Gross revenue rose to $93.7 million in the latest quarter, up a healthy 9% from the quarter a year ago. Gross profit was also up by 9%. For the third quarter of 2014, Ascott Residence Trust will distribute 2.11 cents per unit, up a 15% from an adjusted distribution per unit (DPU) in last year’s quarter. The adjusted DPU accounted for the effects from a rights issue and excluded one-off items. No distributions will be made this quarter, as distributions are done semi-annually.

It ended the quarter with a total portfolio value of $4.1 billion.

Foolish investors might want to keep up an eye with the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded, and its sensitivity to the interest rate environment. This is summarized below.

Gearing Ratio 40%
Interest Cover* 4.4
Weighted Average Debt Maturity 3.8 years
Fixed-rate debt 70%
Effective Borrowing Rate 2.9%
Total Borrowings $1.54 billion

 Source: REIT earnings presentation

Gearing of 40% for Ascott Residence Trust is on the higher end. Ascott Residence Trust issued a $150 million perpetual security at 5% per annum on 27 October 2014. There is no due dates for perpetual securities but it is callable at the end of year five. Foolish investors should keep their eye out for debt refinancing in 2015 and 2016, where 42% of its total borrowings will be due.

Operational Highlights

Ascott Residence Trust’s revenue growth for the period was driven by rental income contributions from the new properties that it acquired in Malaysia, China and Japan. The Chairman of Ascott Residence Trusts’ management, Mr. Lim Jit Poh added the comments below for the quarter and his outlook:

“Ascott Reit’s revenue increased consistently largely due to the acquisitions of good quality assets. This year, we have so far added nine properties with over 1,800 apartment units to our portfolio. We acquired a rental housing property in Fukuoka, a prime hotel in Tokyo as well as our first serviced residences in Kuala Lumpur, Dalian, Wuhan and Xi’an. We recently entered Greater Sydney through the acquisition of three quality assets which will continue to be operated under the Quest brand. Quest is a leading serviced apartment provider in Australia. The acquisitions will deepen Ascott Reit’s presence in the mature and stable market of Australia. Ascott Reit’s sponsor, The Ascott Limited (Ascott), also sealed a strategic partnership with Quest to invest in serviced residences in Australia. The partnership will provide a strong pipeline of properties to further grow Ascott Reit’s portfolio” 

Foolish summary

Ascott Residence Trust last traded at S$1.24 yesterday (6 November 2014). That translates to a distribution yield of around 6%, and a historical price-to-book ratio of 0.92.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.