Earlier this morning, Ascott Residence Trust (SGX: A68U) reported that its distribution per unit (DPU) increased 8% over the past year. The increase was due to the better overall performance of the portfolio.
The latest report was for the real estate investment trust’s (REIT) third-quarter earnings results for 2018. Ascott REIT is an established property owner with assets in serviced residences, rental housing, and the hotels. The REIT’s portfolio consists of 73 properties with 11,430 units spread across 37 cities in 14 countries with Ascott’s assets being valued at S$5.3 billion.
Let’s take a quick look at the results.
- Gross revenue increased by 6% year-on-year to S$134.5 million and gross profit rose by 9% to S$64.2 million.
- The uptick in revenue and gross profit resulted in an increase in distributable income which came in at S$39.4 million, higher by 8% over the same period last year. In turn, distribution per unit (DPU) rose 8% to 1.82 cents. The increase in revenue and DPU was attributed to higher contributions from properties acquired in 2017 and better performance from existing properties.
- Next, let’s look at Ascott REIT’s debt profile. As of 30 September 2018, the trust’s gearing stood at 36.4%. The weighted average annualized interest rate stood at 2.3%. The REIT didn’t mention specifics about its debt duration but stated that the bulk of its debt is maturing in 2020 and beyond. Around 82% of the REIT’s debt on fixed-rate loans while 47% of its income was hedged.
- The trust reported an average length of stay of approximately three months with 58% stays being less than a week. The revenue per available room came in at S$158 increasing by 8% year-on-year.
- Ascott REIT’s net asset value (NAV) declined by 2.4% compared to 31 December 2017 coming in at S$1.22 as of 30 September 2018.
The Road Ahead
Beh Siew Kim, Chief Executive Officer of the REIT manager, commented about the current quarter and the REIT’s outlook:
“Ascott Reit’s key markets achieved strong operating performance in 3Q 2018. Singapore was the best performer with a 27%1 surge in gross profit for properties under management contracts due to higher market demand and average daily rate. Gross profit in Japan and the United States grew 24%1 and 21%1 respectively. Japan saw higher corporate demand in Tokyo, while there was stronger demand for the refurbished apartments at Sheraton Tribeca New York Hotel. Excluding Ascott Reit’s divestment of two properties in Shanghai and Xi’an in January 2018, gross profit in China increased 16%1, bolstered by an increase in project groups on extended stay. In Australia, gross profit for properties under management contracts went up 7%1 due to higher leisure demand.”
“Our refurbished properties have been able to command higher valuation and average daily rates of about 10% to 20% while enhancing the experience for guests. We have recently completed the renovation of Ascott Makati and Sheraton Tribeca New York Hotel. Guests can look forward to the newly renovated Citadines Trocadéro Paris and Somerset Grand Hanoi by end of this year and Somerset Grand Citra Jakarta in 1Q 2019.”
Units of Ascott REIT are currently trading at S$1.06, sporting a price-to-book ratio of around 0.87 and a yield of 6.7%.
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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own any of the shares mentioned.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore has recommended shares of Ascott REIT. a Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.