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What You Need to Know about Ascendas Hospitality Trust’s Latest Earnings Release

Ascendas Hospitality Trust (SGX: Q1P) reported its second quarter results on Thursday.

For some background on the trust, its current portfolio comprises of 12 hotels located in Australia, China, Japan, and Singapore. In our city-state, Ascendas Hospitality Trust owns Park Hotel Clarke Quay, which is valued at S$312 million.

For the quarter ended 30 September 2014, gross revenue went up 6.5% to S$56.5 million from S$53.1 million in the previous year. Ascendas Hospitality Trust had enjoyed a full quarter’s worth of revenue contribution from the newly-acquired Osaka Namba Washington Hotel Plaza and that helped to spruce up the trust’s top-line. Lending a helping hand was also an improved performance from the hotels in Australia. Consequently, net property income went up 6.9% year-on-year to S$22.8 million.

However, distributable income decreased by 3.2% from S$14.6 million a year ago to S$14.1 million. A S$2.1 million expense incurred for the partial unwinding of cross-currency swaps for the trust’s Australia portfolio had been one of the main causes of the decline in distributable income.

The above, coupled with an enlarged stapled-security base due to a private placement, had resulted in a 10% drop in distribution per stapled security (DPS) of 1.27 Singapore cents for the second quarter. If the costs for the unwinding of the cross-currency swaps were excluded, the trust’s DPS would have been 1.46 cents, which would have represented a 3.5% year-on-year increase.

In any case, the REIT’s use of funds from the private placement is an area to keep an eye on for investors. The placement is already a big part of the fall in distributions for the REIT in the second quarter and if the capital from the placement’s not deployed wisely, it might end up to be a painful dilution for unit-holders over the long-run.

The bulk of Ascendas Hospitality Trust’s gross revenue comes from its hotels in Australia. With their importance to the trust’s results, investors might be happy to note that the average revenue per available room for the Australian properties had grown by 3.2% compared to a year ago. The average occupancy rate also ticked up from 82.7% to 84.3% while the average daily rate grew by 1.3%.

As of 30 September 2014, Ascendas Hospitality Trust had a gearing ratio of 38.3% and that’s a slight step backwards from a quarter ago when the ratio stood at 38.2%. The trust’s weighted average interest rate also rose slightly from 3.0% as of 30 June 2014 to 3.1% – a prolonged rise in the cost of debt for the trust might be something for investors to watch, though the risks are really low here as 91.1% of its total borrowings are on fixed rates.

The trust’s net asset value per unit touched in at S$0.73, a small decline from S$0.74 per unit at the end of June this year.

Ascendas Hospitality Trust closed at S$0.715 on Thursday, and that price translates to a price-to-book value of 0.98 and a distribution yield of 7.4%.

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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 Sudhan P doesn’t own shares in any companies mentioned.