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

Ascott Residence Trust (SGX: A68U) released its earnings for the quarter and year ended 31 December 2016 this morning.

As a quick background, Ascott Residence Trust is managed indirectly by a wholly-owned subsidiary of CapitaLand Limited (SGX:C31). The REIT’s property portfolio primarily covers serviced residences or rental housing. As of 31 December 2016, it has 90 properties, with 11,627 units, that are located in 38 cities.

You can catch the results from Ascott Residence Trust’s previous quarter here.

Financial highlights

The following’s a rundown on some of the latest financial figures from Ascott Residence Trust:

  1. Revenue rose to $126.7 million in the reporting quarter, up 6% from the same quarter a year ago. For the entire 2016, revenue was up 13% to S$475.6 million compared to 2015.
  2. Gross profit for the quarter rose 9% 3% year-on-year to S$58.2 million. For the full year, gross profit was up 3% to $222.2 million.
  3. Distribution per unit (DPU) for the quarter is at 2.04 cents, a 1% decline from the 2.07 cents seen in the fourth quarter of 2015. Adjusted for one-off items, the REIT’s DPU for 2016’s fourth quarter would only be 1.93 cents instead. Ascott Residence Trust closed out 2016 with 8.27 cents in DPU, an increase from 7.99 cents in 2015. But, if the full-year DPUs for 2016 and 2015 were adjusted for one-off items, Ascott Residence Trust would have a DPU of 7.73 cents in 2016 and 8.06 cents in 2015.
  4. The total portfolio value of the REIT currently stands at $4.51 billion. Ascott Residence Trust ended 2016 with a net asset value per unit of $1.33, down 5.7% from a year ago.

Foolish investors may also 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 summarised for Ascott Residence Trust below:

Ascott Residence Trust debt profile table
Source: Ascott Residence Trust’s earnings presentations

Ascott Residence Trust ended 2016 with a gearing ratio of 39.8%. This is fairly close to the 45% gearing limit that REITs in Singapore are subjected to.

Meanwhile, its effective borrowing rate has declined to 2.4% while the weighted average debt to maturity has increased slightly to 4.7 years. Ascott Residence Trust has 8% of its total debt coming due in 2017, and that’s something to watch out for.

Operational highlights

In the fourth quarter of 2016, Ascott Residence Trust benefited from higher revenue from its US assets. Bob Tan, chairman of the REIT’s manager, summed up the REIT’s year with the following comments:

“Ascott Reit achieved solid DPU growth and record-breaking distributable income for FY 2016. The strong performance was due to our acquisitions of quality assets over the last two years, and our active capital and asset management.

We acquired Sheraton Tribeca New York Hotel last year and our two prime properties in New York enjoy high average occupancy of over 90%. The U.S. market was our top contributor to revenue in 2016 and it is now amongst our top five markets in terms of asset value.”

Tan also outlined the REIT’s plans for the coming year:

“As a leading global serviced residence REIT with the most diversified portfolio in key cities around the world, Ascott Reit will continue to enhance its portfolio and focus on providing stable returns to Unitholders.

We are actively seeking accretive acquisitions in gateway cities in markets such as Australia, Japan, Europe and the U.S. We will also look at divesting properties with limited growth potential and re-deploying the proceeds in higher yielding assets.”

Ascott Residence Trust’s units opened trading at S$1.17 each this morning. This translates to a historical price-to-book ratio of 0.88 and a distribution yield of around 6.6%.

Editor’s note: The original version of this article had incorrectly stated in gross profit for the reporting quarter was up 9%. This has been corrected to 3%. 


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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.