Ascott Residence Trust (SGX: A68U) is a real estate investment trust (REIT) focusing on hospitality assets. The REIT’s portfolio currently consists of 73 properties with 11,430 units in 37 cities across 14 countries in the Americas, Asia Pacific and Europe. Its sponsor is property giant, CapitaLand Limited (SGX: C31).
There are two things about the REIT that investors may want to know about right now: its latest financial performance and valuation.
Here’s a table showing important items from Ascott Residence Trust’s financial performance for the third quarter of financial year ending December 2018.
Source: Ascott Residence Trust’s Earnings Update
Overall, we see that the performance was positive with stronger metrics across the board.
Revenue was up 6% year-on-year as a result of acquisitions, as well as stronger contribution from existing properties. Revenue per available unit rose 8% to S$158 on higher demand for Ascott Residence Trust’s properties in markets including Singapore, China and Japan. As of 30 September 2018, the REIT’s gearing stood at 36.4%.
Beh Siew Kim, chief executive of the REIT’s manager, commented:
“Ascott Reit’s key markets achieved strong operating performance in 3Q 2018. Singapore was the best performer with a 27% surge in gross profit for properties under management contracts due to higher market demand and average daily rate.
Gross profit in Japan and United States grew 24% and 21% 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%, bolstered by an increase in project groups on extended stay. In Australia, gross profit for properties under management contracts went up 7% due to higher leisure demand.”
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows Ascott Residence Trust’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.
Source: SGX StockFacts
We can see that Ascott Residence Trust is trading at a discount to market average based on its low PB ratio and comparable distribution yield.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.