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

Ascott Residence Trust (SGX: A68U) released its 2017 first quarter earnings report this morning. The reporting period was from 1 January 2017 to 31 March 2017.

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 and rental housing properties. As of 31 March 2017, it has 90 properties with 11,635 units in 38 cities.

You can catch the results from the REIT’s previous quarter here.

Financial highlights

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

1. Revenue rose to $111.3 million in the latest quarter, up 5% from the same quarter a year ago.

2. But gross profit for the quarter fell by 3% to $47.2 million.

3. The REIT’s distribution per unit (DPU) for the reporting quarter will be 1.51 cents, a 14% decrease from the 1.75 cents seen in the first quarter of 2016.

4. The total portfolio value of the REIT stands at $4.8 billion. It ended the reporting quarter with an adjusted net asset value per unit of $1.27, a 5.2% decline from the same quarter a year ago.

Let’s take a look at Ascott Residence Trust’s debt profile next:

2017-04-21 Ascott Residence Trust Debt Table
Source: Ascott Residence Trust’s earnings presentation

Ascott Residence Trust ended the year with a gearing ratio of 41.1% after its borrowings increased from $1.82 billion a year ago to $1.93 billion. This is moving close to the 45% gearing limit for REITs in Singapore.

On a more positive note, the REIT’s effective borrowing rate declined to 2.3% while the percentage of its fixed rate debt increased to 82%. Ascott Residence Trust has 8% of its total debt outstanding in 2017 that needs to be refinanced.

Operational highlights and a future outlook

For 2017’s first quarter, Ascott Residence Trust benefited from higher revenue from management contracts. Bob Tan, the chairman of the REIT’s manager, summed up the quarter’s performance:

“Ascott Reit remains focused on providing Unitholders with stable returns and are constantly on the lookout for quality assets to enhance our portfolio. Sheraton Tribeca New York Hotel, which we acquired last year, continues to achieve above 90% occupancy.

Ascott Reit’s recent successful rights issue was 182% oversubscribed. We will use the proceeds to acquire Citadines City Centre Frankfurt, Ascott Reit’s first property in the city, Citadines Michel Hamburg, and Ascott Orchard Singapore. These properties are expected to further strengthen Ascott Reit’s portfolio, increase our earnings base, and give us stable income through master leases.

When the acquisitions of the German and Singapore properties are completed, they will increase Ascott Reit’s asset size to S$5.3 billion, reinforcing its position as the largest hospitality REIT in Singapore. We continue to actively seek accretive acquisitions in gateway cities in markets such as Australia, Japan, Europe and the U.S.”

The REIT also provided this outlook:

“Going forward, global economic recovery is likely to remain slow-paced.

Notwithstanding, Ascott Reit will continue to focus on creating stable income and returns to Unitholders through its diversified portfolio and extended-stay business model, together with the master leases and management contracts with minimum guaranteed income.”

Ascott Residence Trust’s units opened trading at S$1.10 each this morning. This translates to a historical price-to-book ratio of 0.87 and a distribution yield of around 7.3%.

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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.