Ascott Residence Trust’s Latest Earnings: What Investors Should Know

Ascott Residence Trust (SGX: A68U) released its fiscal second-quarter earnings report yesterday evening. The reporting period was from 1 April 2015 to 30 June 2015.

Ascott Residence Trust is a real estate investment trust that’ managed indirectly by a wholly-owned subsidiary of Capitaland Limited (SGX: C31), one of Singapore’s real estate giants.

The REIT’s property portfolio primarily consists of serviced residences or rental housing properties. As of 30 June 2015, it had 90 properties with 10,499 apartment units in 37 cities across Australasia and Europe. Some of these cities include Barcelona, Brussels, Guangzhou, Ho Chi Minh, Kuala Lumpur, Perth, Singapore, and Tokyo.

You can learn more about the REIT in here and here.

Financial highlights

The following’s a quick run through of Ascott Residence Trust’s latest financial figures:

  1. Revenue rose to $98.7 million in the reporting quarter, up 12% from the same quarter a year ago.
  2. Gross profit for the reporting quarter rose by 6% year over year from $46.5 million to $49.4 million.
  3. Unfortunately, the top-line growth couldn’t translate into a stronger bottom-line. Ascott Residence Trust’s distribution per unit (DPU) for the reporting quarter was 2.09 cents, a decline of 5% from 2.19 cents seen in the second quarter last year.
  4. The REIT’s portfolio valuation stood at $3.8 billion on 30 June 2015 and the REIT had an adjusted net asset value per unit of $1.37, down slightly from the selfsame figure of $1.38 that was reported a year ago.

Beyond these, Foolish investors might want to keep an eye on the REIT’s debt profile too. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarised for Ascott Residence Trust below:

2015-07 Ascott REIT Debt Table

Source: Ascott Residence Trust’s earnings report 

On 30 June 2015, Ascott Residence Trust had $1.5 billion in debt. On a quarter-on-quarter basis, the most notable improvement that the REIT had made to its balance sheet is the reduction of its gearing from 38.7% at March 2015 to 35.8%.

But, the REIT had issued S$250 million in fixed rate perpetual securities during the reporting quarter to fund a host of real estate acquisitions in Australia, Japan, and the United States of America. The post-acquisition gearing is expected to rise to 39.6%.

Overall, Ascott Residence Trust’s debt maturity profile is fairly well-distributed by year and that’s good to know for its investors.

Operational highlights

For the second quarter of 2015, revenue growth was supported by growth in management contracts in China and Japan.

Revenue per available unit (RevPAU) was S$129 for the reporting quarter, down 6% from the selfsame figure of $137 that was recorded in the second quarter last year. This was due to weaker performance from the REIT’s properties in Singapore and Philippines as well as a lower average daily rate from its China properties.

Looking forward, Lim Jit Poh, Chairman of the REIT manager had this statement to add:

“Ascott Reit continues to seek accretive acquisitions of quality assets in key cities to enhance Unitholders’ returns. This year, we have so far announced acquisitions amounting to half a billion dollars. We have recently announced Ascott Reit’s first foray into the United States of America (USA) with the purchase of a prime property in Times Square, New York. We are also acquiring seven other properties that will extend Ascott Reit’s footprint to Melbourne and Osaka, and strengthen our foothold in Tokyo and Kyoto.

These acquisitions will strengthen Ascott Reit’s position as the largest hospitality REIT listed on the Singapore Exchange with asset value of S$4.6 billion. Our portfolio will also expand to close to 11,800 units across 96 properties in 40 cities in Asia Pacific, Europe and the USA. With the completion of our acquisition of the Cairnhill development in Singapore which is expected to be in 2017, Ascott Reit’s asset size will grow to S$5.0 billion. This will bring us closer to achieving our target of S$6.0 billion of assets by 2017.”

Foolish summary

Ascott Residence Trust closed at S$1.32 yesterday. This translates to a historical price-to-book ratio of 0.96 and a distribution yield of around 6.1%.

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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.