Latest Earnings From Ascott Residence Trust: A Stable Ship Sailing Along

Earlier this morning, Ascott Residence Trust (SGX: A68U), a hospitality-focused real estate investment trust, had announced its results for the year and quarter ending 31 December 2015.

The real estate investment trust’s current portfolio  consists of 89 properties in 14 different countries with a staggering ensemble of nearly 11,300 apartment units. The properties have a value of S$4.37 billion as of 31 December 2015.

Revenue and distribution

Ascott Residence Trust saw its revenue for 2015 come in at S$421.1 million, up 18% from 2014. For the quarter, the REIT reported revenue of S$119.2 million, which represents growth of 26%, when compared to the same quarter a year ago.

The REIT’s higher revenue for the year can be attributed to acquisitions made in 2014 and 2015 which contributed additional revenue of S$66.1 million. This increase was partially offset by, among other things, a decrease of S$1.1 million in revenue resulting from the sale of six rental housing properties in the third-quarter of 2015.

While higher revenue can be something nice to see, it should be noted that on a same-store basis, the REIT’s top-line for 2015 had actually decreased by S$0.7 million, due to lower revenue from properties in France and Germany as a result of the euro’s depreciation against the Singapore dollar.

On the surface, it looks like Ascott Residence Trust’s higher revenue couldn’t benefit its investors. Unitholders’ distribution for 2015 declined by 2% to S$123.3 million, compared to 2014. Similarly, unitholders’ distribution for the quarter also decreased by 3% compared to a year ago, coming in at S$32.1 million.

But, it may be worth noting that the decrease in unitholders’ distributions (for both the year and quarter) was partly due to one-off items that were included in 2014 (S$6.1 million in the fourth-quarter of the year and S$9.1 million in the entire year)

With the decrease in unitholders’ distributions, the REIT’s distribution per unit (DPU) for 2015 dipped by 3% to 7.99 Singapore cents.

If one-off items were adjusted for in both 2014 and 2015, the REIT’s DPU in 2015 would have been 8.06 Singapore cents, up by 6% from the figure of 7.61 cents in 2014.

Balance sheet and financial strength

Coming to the balance sheet, Ascott Residence Trust’s gearing at end-2015 was 39.3%, a slight increase from the 38.5% seen at end-2014. Meanwhile, the interest cover had also dropped a little from 4.3 times at end-2014 to 4.1.

A positive development on the balance sheet front can be seen in Ascott Residence Trust’s lower effective borrowing rate – a borrowing rate of 3.0% in 2014 had declined to 2.8% in 2015. The REIT currently has approximately 79% of its total borrowings on fixed rates and that may help cushion the REIT from any short-term interest rate hikes.

Ascott Residence Trust’s net asset value (NAV) per unit had increased from S$1.37 in 2014 to S$1.41 in 2015.

Future outlook

The REIT commented in its earnings release that while global economic recovery is likely to be slow due to uncertainty in emerging markets, it still expects demand for serviced residences to “remain healthy,” especially in its key markets.

Ascott Residence Trust also mentioned that is it on the lookout for other acquisitions to bring its portfolio size to S$6.0 billion by 2017. For perspective, the REIT had ended 2015 with a portfolio size of S$4.37 billion, as already mentioned.  In addition, the REIT has marked some properties for asset enhancement initiatives (AEIs), which should further support revenue and distribution growth.

At its current price of S$1.115, Ascott Residence Trust trades at a price-to-book ratio of 0.8. With its trailing DPU of 7.99 cents, the REIT also has a distribution yield of 7.2%.

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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 Esjay does not own shares in any companies mentioned.