A-HTrust – Phillip

Another hospitality play in action

Company Overview

Ascendas Hospitality Trust is stapled group comprising A-HREIT and A-HBT. Its mandate is to invest in income-producing hospitality real estate and real estate-related assets in Asia-Pacific region, including the operation and management of the real estate assets.

• A-HTrust's initial portfolio consists of 10 quality hotels with valuation of c.S$1,057mn.

• At the IPO price of S$0.88, A-HTrust is trading at 8.6% above its book value compared to CDL HT at 29.7% of NAV premium.

• Given the strong sponsor and strategic collaboration with Accor, we opine the stock is fairly value with some potential upsides for the attractive yield of 7.9%.

What is the news?

A-HTrust is scheduled to list on 27 July 2012, 2pm. Approximately S$581.3mn will be raised from the issuance including the over-allotment option. Of which, 86% is uitilised to partially fund the purchase of the properties. Its initial portfolio consists of 10 quality hotels spanning across Australia, China and Japan with 3,482 rooms and a property valuation of c.S$1,057mn. Pre-allotment, the sponsor will retain 35.0% stake in the trust.

How do we view this?

The listing of A-HTrust would bring the number of REITs in SGX to 24 REITs. Certainly, A-HTrust will provide another option for the investment community who believe in the tourism growth story in Australia. Australia hotels in the four cities where A-HTrust has a foothold are well-positioned to rake in higher RevPAR attributable to the limited supply of hotel rooms and proliferation of low-cost carriers to these cities.

The dividend yield of 7.9% for FY13 is compelling to investors who prefer dividend plays especially in the period of low interest rate and high inflation environment given the erratic market climate. Since A-HTrust is a stapled security between REIT and business trust, investors would be assured with 90% payout ratio on the distributable incomes. However, please bear in mind that the distributions may not be relatively stable as the earnings are highly dependent on the hotel performance which is cyclical with the market conditions.

Investment Actions?

At the IPO price of S$0.88, the stock is trading at 8.6% above its book value compared to CDL HT at 29.7% NAV of premium. Given the strong sponsor and strategic collaboration with Accor, we opine the stock is fairly value with some potential upsides for the attractive yield