Latest Earnings From Accordia Golf Trust: Strong Growth Seen With More Ahead

Yesterday evening, Accordia Golf Trust (SGX: ADQU) announced its fiscal third-quarter earnings for the quarter ended 31 December 2015.

Accordia Golf Trust is a business trust and it is unique amongst the other investment trusts listed in Singapore because its business revolves around the ownership of golf courses.

The trust’s portfolio currently consists of 89 golf courses which are all located in Japan. These courses have an appraised value of 150.3 billion yen (around S$1.8 billion). You can read more about the trust in here.

With that, let’s dig into Accordia Golf Trust’s latest earnings.

Financial highlights

For the reporting quarter, operating income grew 4.4% year-on-year to 15.0 billion yen while profit after income tax had surged by 12.8% to 3.37 billion yen. The top-line growth had been due mainly to good weather conditions seen during the quarter, which helped boost the number of visitors to the trust’s golf courses by 5.6% from a year ago.

Given the double-digit profit growth, Accordia Golf Trust’s total distributable income available had also climbed by 12% year-on-year to 2.0 billion yen. On a per unit basis, the business trust’s available distribution had grown by 19.3% from a year ago to 2.16 Singapore cents.

On the balance sheet front, Accordia Golf Trust ended the reporting quarter with a loan-to-value ratio (total loans over total assets) of 28.9%. This is an improvement from a year ago when the ratio was at 30.2%.

As of 31 December 2015, the business trust had total borrowings of 45.5 billion yen, which are made up of 45 billion yen in term loans and 500 million yen in a subordinated loan. The term loans will expire in tranches of 15 billion yen each in August 2017, August 2018, and August 2019.

The term loans were initially on floating interest rates that are pegged to the 6-month yen TIBOR (Tokyo Interbank Offered Rate). But, Accordia Golf Trust had managed to fix the interest rates on those term loans to be at 1.71% (for the tranche maturing on August 2017), 2.00% (August 2018), and 2.34% (August 2019).

While the trust’s borrowing costs can be considered to be on the low side when compared to most other Singapore-listed real estate investment trusts, there may be even cheaper debt for the trust to take advantage of in the near future given the negative interest rates that Japan’s central bank had introduced recently. In any case, Accordia Golf Trust’s progress in the refinancing of its borrowings is something investors may want to keep an eye on.

Accordia Golf Trust ended its reporting quarter with a net asset value per unit of S$0.89, up 4.7% from a year ago.

Operational highlights and future prospects

On the operational front, Accordia Golf Trust had experienced a 5.6% year-on-year rise in visitorship – as mentioned earlier – to 1.538 million. Given the higher influx of visitors, the utilization rates of the trust’s golf courses had also increased by 3.4 percentage points from a year ago to 80.2%.

It’s also worth noting that the trust’s golf courses have managed to receive a consistent inflow of visitors over the past five years, with the number of annual visitors never falling below the 5 million mark.

In the earnings release, Accordia Golf Trust gave a bright outlook. It mentioned that “the general market outlook of Japan has been gradually improving” with the introduction of Abenomics. Meanwhile, the trust believes that the upcoming 2020 Tokyo Olympics will also give a boost to Japan’s economy.

The trust also gave the following comments which highlights its growth opportunities:

“Looking ahead, the overall demand for golf in Japan is expected to be sound, underpinned by resilient demand from the senior golfers. Japanese baby boomers, those who are presently in their sixties and approaching retirement will have more time in retirement to play golf. According to the Statistics Bureau of Japan, approximately 26.8% of the population are more than 65 years old as at 1 August 2015.

The surge in inbound tourism in Japan is beneficial for [Accordia Golf Trust] to capture the higher demand for golf. According to the Japan National Tourism Organization, the number of foreign visitors increased 47.1% year-on-year to an estimated 19.7 million from January 2015 to December 2015. This tourism boom in Japan is expected to drive the demand for golf in the mid-to-long term.”

Accordia Golf Trust’s units closed at S$0.53 on Wednesday, down around 45% from its listing price of S$0.97. At that price, the trust is valued at 0.6 times its latest book value and has an annualised distribution yield of 12%.

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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 James Yeo doesn’t own shares in any companies mentioned.