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10 Takeaways From Ascott Residence Trust’s 2018 First Quarter Earnings Update

Ascott Residence Trust (SGX: A68U) is a REIT that invests in serviced residences, rental housing, and other hospitality assets around the world. Since its listing in 2006, the REIT has grown its portfolio by nearly 500% to one that comprises 73 properties worth S$5.2 billion.

On Wednesday, Ascott Residence Trust announced its results for the first quarter of 2018. Here are 10 takeaways from its latest earnings update:

1. Revenue for the quarter inched up by 1.4% to S$112.8 million from S$111.3 million a year ago. Consequently, gross profit grew 2.7% to S$48.7 million.

2. Unitholders’ distributable income climbed 16.1% to S$29.2 million from S$25.1 million a year ago. This was due largely to contributions from four acquisitions the REIT made in 2017, and a realised foreign exchange gain of S$1.6 million from the proceeds of the sale of two serviced residences in China.

3. Distribution per unit (DPU), however, declined 10.6% to 1.35 Singapore cents from 1.51 Singapore cents a year ago. This can be attributed to the absence of one-off items in the first quarter of 2018, and an enlarged unit base following a rights issue that occurred on April 2017. If the rights issue was adjusted for, Ascott Residence Trust said that its DPU would have increased by 15.4% year-on-year instead.

4. As of 31 March 2018, Ascott Residence Trust had a gearing ratio of 36.1%, and an effective borrowing rate of 2.3% per year. 86% of its total borrowings are on fixed interest rates. The REIT has an interest cover ratio of 4, and a weighted average debt to maturity of 4.0 years.

5. As of 31 March 2018, the trust had a net asset value per unit of S$1.22, slightly lower than S$1.25 at the end of the previous quarter.

6. In the first quarter of 2018, Ascott Residence Trust earned 50% of its income from master leases and management contracts with minimum guaranteed income. These two types of leases provide the REIT with a stable rental income base. The other 50% of its income was earned through management contracts that depend largely on the performance of the properties.

7. Revenue from master lease contracts rose 33% to S$21.6 million in the reporting quarter, largely due to the contribution of the newly acquired Ascott Orchard in Singapore, and annual rental increments. Revenue from management contracts with minimum guranteed income grew 14% to S$15.9 million, on the back of organic growth. Meanwhile, revenue from management contracts declined by 7% to S$75.3 million.

8. The trust is currently pursuing asset enhancement initiatives for four of its properties. They are Sheraton Tribeca New York Hotel, Ascott Makati, Somerset Grand Hanoi and Somerset Grand Citra Jakarta.

9. On the outlook, Ascott Residence Trust’s management said that they would continue to look out for yield-accretive opportunities in key gateway cities, while identifying opportunities to unlock the value of the REIT’s assets and redeploy the capital into higher yielding assets.

10. At the time of writing, Ascott Residence Trust trades at a price of S$1.13 per share. This translates to a price to book ratio of 0.92, and an annualised distribution yield of 4.77%.

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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 Jeremy Chia doesn’t own shares in any companies mentioned.