Ascendas Hospitality Trust’s Latest Earnings: What Investors Should Know

Ascendas Hospitality Trust (SGX: Q1P) released its first-quarter earnings report for its fiscal year ending 31 March 2016 (FY2016) yesterday evening. The reporting period was from 1 April 2015 to 30 June 2015.

Ascendas Hospitality Trust is structured as a stapled security whereby one stapled security consists of a pair of a real estate investment trust (REIT) and a business trust. You can read about the differences between the two types of trusts here.

Currently, the stapled security’s portfolio has 11 hotel properties which are located in Singapore, Australia, China, and Japan. At the local front, it has a stake in Park Hotel (Clarke Quay).

You can catch the trust’s previous quarterly earnings here.

Financial Highlights

The following’s a quick take on the trust’s latest financial figures:

  1. Gross revenue for the reporting quarter was down slightly by 2.7% to $52.8 million compared to a year ago.
  2. Consequently, net property income (NPI) slipped by 0.9% over the same period from $21.6 million to $21.4 million.
  3. But, the trust’s distribution per stapled security (DPS) for the reporting quarter will be 1.28 cents, representing a 3.2% bump up from 1.24 cents in the same quarter last year.
  4. As of 31 March 2015, Ascendas Hospitality Trust’s portfolio value stood at around $1.34 billion (after adjusting for the divestment of a property in June 2015). The stapled security ended its reporting quarter with a net asset value per unit of $0.71, down from $0.74 a year ago.

Beyond these, Foolish investors might want to keep an eye on 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. These are summarized for Ascendas Hospitality Trust below:

Ascendas Hospitality Trust's balance sheet details

Source: Ascendas Hospitality Trust’s earnings report

Ascendas Hospitality Trust’s gearing of 38% at the end of the reporting quarter is on the higher end. This gearing level consists of a 28.8% gearing for the REIT component and a 43.2% gearing level for the business trust component. Foolish investors should be aware that the Monetary Authority of Singapore will be capping the gearing for REITs in the future to a single-tier limit of 45%.

Operational highlights

While the overall gross revenue for the REIT had declined slightly, there were vast differences in the performances of the individual properties.

The fall in gross revenue (in Singapore dollar terms) for the stapled security was mainly due to a 5.4% year-on-year decline in gross revenue for the Australian properties. Both revenue and NPI for Australia were hampered by a weaker Australian dollar. This was offset by gross revenue increases from the rest of the trust’s properties in China, Japan, and Singapore.

The stapled trust also said that starting from the reporting quarter, it will begin to retain 5% of its income available for distribution for working capital purposes.

Tay Juay Hiang, the Chief Executive Officer of the trust’s manager, had the following commentary for the reporting quarter:

“We are encouraged by the performance of our portfolio where our Australia and Japan portfolios showed strong growth in the local currencies, especially the Australia portfolio which posted net property income growth of approximately 10% year-on-year in AUD terms.

The performance of the China portfolio was marginally weaker in RMB terms. Although the portfolio recorded overall organic growth, we continue to face headwinds in the form of unfavourable currency movements. Compared against the same quarter last year, the average exchange rates for AUD and JPY both weakened against SGD by approximately 10%. This moderated our financial performance as gross revenue and net property income both posted decline in SGD terms.”

Foolish summary

Ascendas Hospitality Trust last traded at $0.68 yesterday. This translates to a historical price-to-book ratio of 0.96 and a trailing distribution yield of 7.5%.

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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.