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

Last evening, Ascott Residence Trust (SGX: A68U), a hospitality-focused real estate investment trust, announced its 2016 third-quarter results.

The REIT’s portfolio currently consists of 90 properties in 14 different countries that collectively have nearly 11,700 units. Ascott Residence Trust has total assets of S$4.9 billion at the moment.

With that, let’s jump into the REIT’s latest earnings.

Financial highlights

The following are some of the REIT’s latest financial figures:

  • For the quarter ending 30 September 2016, revenue increased by 9% year-on-year to S$123.9 million.
  • Gross profit, meanwhile, climbed by just 4% from S$55.2 million in the third-quarter of 2015 to S$57.5 million.
  • But, unitholders’ distribution managed to rise by 21% to S$38.7 million from a year ago.
  • Similarly, the REIT’s distribution per unit (DPU) climbed by 9.3% from 2.15 cents in the third-quarter of 2015 to 2.35 cents. If one-off items were stripped from both quarter’s DPUs, the REIT’s DPU would have still inched up by 3.9% from 2.07 cents in the third-quarter of 2015 to 2.15 cents in the reporting quarter.
  • The REIT ended the reporting quarter with a net asset value (NAV) per unit of S$1.30, down 5.8% from the S$1.38 seen a year ago.
  • The trust saw its gearing level increase slightly from 40% in the third-quarter of 2015 to 41%. But, Ascott Residence Trust’s interest cover had improved from 4.1 to 4.2, the effective borrowing rate had dropped from 2.8% to 2.4%, and the percentage of total debt on fixed rates had stepped up from 76% to 80%. The trust also managed to lengthen the weighted average debt to maturity for its borrowings from 4.2 years to 4.6 years.
  • Only S$2.3 million in borrowings are due for the rest of 2016. In 2017 and 2018, a collective 24.4% of the REIT’s total borrowings will mature. Investors may want to watch the trust’s progress in refinancing.

Business highlights

During the reporting quarter, Ascott Residence Trust managed to enjoy a revenue per available unit (RevPAU) of S$144 per day, up 2% from a year ago. The average length of stay in the REIT’s properties had also increased from 3.5 months to 4 months over the same period.

A future outlook

Commenting on its future prospects, Ascott REIT mentioned that “notwithstanding the weak global growth outlook, demand for serviced residences in Ascott REIT’s balanced portfolio is expected to remain resilient.” The REIT added that it “will continue to deliver stable income and returns to its Unitholders” given its “diversified portfolio and extended-stay business model.”

The REIT also shared some details on its acquisition plans and current asset enhancement initiatives. It said:

“The Group continues to look out for accretive acquisition opportunities in the key gateway cities of Australia, Japan, Europe and United States of America.  Phased refurbishments at Somerset Ho Chi Minh City and Ascott Makati have been completed in 3Q 2016. We expect to complete the refurbishments at Somerset Ho Chi Minh City, Somerset Millennium Makati and Citadines Barbican London in 2017.”

Ascott Residence Trust had shared its thoughts and action plans as well with regards to the management of its debt and currency risks (on the latter point, it’s worth noting that the REIT reports in the Singapore dollar but conducts business in 14 countries). Here’s what the REIT said:

“In view of the possibility of higher interest rates, the Group has been proactive in many of its capital management initiatives. As of 30 September 2016, the Group has kept 80% of its total borrowings on fixed interest rates to mitigate the effects of interest rate volatility and the Group’s effective borrowing rate has remained stable at 2.4% per annum.

We have also taken a proactive approach to manage the impact of exchange rate volatility on our earnings by entering into foreign currency forward contracts to hedge approximately 30% of the Group’s anticipated FY2016 Unitholder’s distribution derived in foreign currencies.”

Ascott Residence Trust’s units closed at a price of S$1.14 each yesterday evening. At that price, the REIT has a price-to-book ratio of 0.88.

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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.