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

Ascott Residence Trust (SGX:A68U) released its third quarter earnings report yesterday. The reporting period was from 1 July 2015 to 30 September 2015.

Ascott Residence Trust is a real estate investment trust that’s 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 September 2015, it had 90 properties with 11,392 apartment units in 38 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 here and here . You can also catch the previous quarter’s earnings here .

Financial Highlights

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

  1. Revenue rose to S$113.2 million in the latest quarter, up 21% from the same quarter a year ago.
  2. Gross profit for the quarter rose by 13% year on year. This line item came in at S$55.2 million, compared to S$48.8 million in the third quarter a year ago.
  3. The reporting quarter’s distribution per unit (DPU) was S$0.0215 per unit, a 2% increase from the S$0.0211 per unit paid out the third quarter last year. The DPU for this quarter included a S$1.2 million one-off gain.
  4. Its total assets was valued at S$4.7 billion as of 30 September 2015. The REIT had a net asset value per unit of S$1.38.

Beyond that, 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.


2015-10 Ascott REIT TableSource: Ascott Residence Trust’s
presentation

Total debt over the past year rose from S$1.54 billion to S$1.86 billion as of 30 September 2015. Furthermore, the REIT’s gearing is relatively high at 40%. Foolish investors should be aware that there is a proposal from the Monetary Authority of Singapore to cap future gearing for REITs to a single-tier limit of 45%.

Overall, Ascott Residence Trust’s debt profile is fairly well distributed annually.

Operational Highlights

For the third quarter of 2015, revenue growth was supported by growth in management contracts in Australia, China, Indonesia, Japan and Malaysia. Revenue per available unit (RevPAU) was S$141 for the reporting quarter, a nice 10% increase from the third quarter last year.

Summing up the quarter, Mr. Lim Jit Poh, Chairman of the REIT manager had this statement to add:

“We continue to enhance Ascott Reit’s portfolio and optimise Unitholders’ returns through accretive acquisitions as well as active asset and capital management. In 3Q 2015, we completed half a billion dollars worth of acquisitions. We acquired six properties in Australia, Japan and the United States of America, and the remaining stakes in two properties in Japan. With Ascott Reit’s entry into the United States of America, we are seeing maiden contribution from our property in Times Square of New York in this quarter. Recently, we also divested six rental housing properties in the regional cities of Japan for JPY4,475 million (approximately S$52.6 million1 ), which is 13% higher than the last valuation on 30 June 2015. This is in line with our active asset management strategy to unlock the value of properties with limited potential and re-deploy the proceeds in higher yielding assets.

We will actively seek accretive acquisitions in markets such as Australia, Japan, Europe and the United States of America. Ascott Reit is the largest hospitality REIT in Singapore with an asset value of S$4.7 billion. With the expected completion of our acquisition of the Cairnhill development in Singapore in 2017, Ascott Reit’s asset size will grow to S$5.1 billion; putting us well on track to achieve our target asset value of S$6.0 billion by 2017.”

Foolish summary

Ascott Residence Trust closed at S$1.22 yesterday. This translates to a historical price-to-book ratio of 0.88 and a distribution yield of around 6.4%.

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