Ascott Residence Trust: Focusing on consistency during uncertainty

Shawn Sng  |   18 Apr 2022  |    83 views

-Investment grade issuer coupled with adequate liquidity

-Recent lifting of global travel restrictions bode well for a rebound in the hospitality sector.

-Increase in percentage in long-term stay properties in portfolio mix provide more stability.

 

Company background

Ascott Residence Trust (ART) is the largest hospitality trust in the Asia Pacific with an asset value of S$7.7 billion as at 31 December 2021. The company invests primarily in income-producing real estate and real estate-related assets which are used or predominantly used as serviced residences, rental housing properties, student accommodation and other hospitality assets diversified across different countries. ART’s international portfolio comprises 93 properties with about 17,000 units in 43 cities across 15 countries in the Asia Pacific, Europe and the United States of America.

Some prominent brands that are under ART are Ascott The Residence, Somerset, Quest and Citadines.

 

Financial Highlights in FY 2021

For the full FY 2021, ART’s revenue increased 7% YoY to $394.4 million (vs FY 2020’s $369.9 million) and gross profit rose 15.8% YoY to $173.3 million (vs FY 2020’s $149.6 million). The increase was led by the pickup in demand from the corporate and leisure segments as restrictions were eased in ART’s key markets (US, United Kingdom and Australia).

 

Liquidity Position and Credit Metrics

ART also has a relatively good credit rating (BBB- by Fitch), which indicates that the expectations of a default is low. The gearing profile of the company is at 37.1% which is lower than the MAS regulatory requirement (up to 50%). This provides a $1.9 billion debt headroom for the company should it require additional debt funding. The interest coverage of ART stands at 3.7x.

 

The debt maturity profile as of 31 December 2021 is as follows:

Figure 1: Debt Maturity profile

 

 

 

 

 

 

 

 

 

 

Source: Ascott Residence Trust

 

ART’s total borrowings are mainly made up of bank loans (72%) and medium-term notes (28%). In FY2022, ART had a total debt of $765 mn that will be maturing, but this will not be a hindrance  as ART has a total of $1.04 bn available funds ($340 mn cash on hand + $700 mn credit facilities) which can be used to meet the current year’s debt obligation.

 

Readjustment of portfolio mix

The COVID-19 pandemic caused instability in revenue for the hospitality industry. Thus, in 2021, ART started to ramp up on its Student Accommodation/Rental Housing mix (5% to 16%) in its portfolio. ART targets to increase its asset allocation in longer-stay accommodation in the US and UK to 25-30% in the coming years. This will allows ART to further diversify from its usual cyclical revenue-generating assets and give more income stability to its unitholders. In FY 2021, 3 Japan Rental Housing properties and 8 US Student Accommodation properties were acquired with an average occupancy length of 2 years.

 

Summary

With a healthy liquidity position, Ascott Residence Trust is adjusting its portfolio mix towards more stability rather than just relying on its usual hospitality mix. We believe that the company is well-positioned to capture growth from the recovering market. The additional stability will sit well with investors/unitholders as it provides more confidence during rocky periods and reduces concentration risk.

 

Recently Issued by ART as at 18 Apr 2022:

-Ascott Residence Trust 3.63% 5 year senior bond (20 Apr 2027)

Related Articles

Key points for September FOMC Meeting

The U.S. Federal Open Market Committee (FOMC) concluded its two-day meeting on the 20th of September 2023.

Shawn Sng  |   21 Sep 2023

AIA 5.1% NC5.5 Perpetual Tier 2 SGD

AIA Group Limited recently announced the issuance of its NC5.5 Tier 2 perpetual SGD bonds with a final price guidance of 5.1%.

Shawn Sng  |   05 Sep 2023

CapitaLand Ascott Reit 4.2% 5 year Senior Unsecured SGD

CapitaLand Ascott Trust, or CLAS, recently announced the issuance of its 5-year senior unsecured bonds with a final price guidance of 4.2%.

Shawn Sng  |   30 Aug 2023

Disclaimers


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the "Research") contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you

?>