Ascott Reits – SSB
ASCOTT REITS, ssb put new rating BUY with target price $1.77
– Initiate with Buy/Low Risk (1L), target price S$1.77 ¨C ART is well-positioned as a leading player with strong brands and execution capability. It offers exposure to the growing Asian mid-term accommodation market, which provides higher revenue stability due to relatively longer lease structures than hotels. We estimate ART is worth S$1.86, including a 12mth DPU of 8.9 cents.
– Strong organic growth from Vietnam, Singapore and Philippines ¨C Properties in these three countries are enjoying high occupancies of 80% to 90% and should see double-digit FY08E RevPAU growth of 11% to 38% due to strong economic growth and FDI flows, which support demand for mid-term accommodation against a backdrop of tight hotel room supply and rising rents for rental properties.
– AUM target of S$2b by end-2008 appears achievable ¨C Its portfolio has grown 47% from S$856m since its listing in Mar 2006 to S$1.26b as at end-Sep 2007 through acquisition of third party and sponsor assets. A potential S$500m worth of properties from Ascott Group could be injected before end-2008.
– Key mid-term risk ¨C We estimate 48% of revenues are denominated in USD in FY08E and FY09E. A structural mid-term US$ decline can translate to lower DPU. Our estimates suggest that a further 1% fall in US$ from our base case will lower FY08E and FY09E DPU by 1.4% and 1.5%, respectively.
– Strong organic growth from Vietnam, Singapore and Philippines ¨C Properties in these three countries are enjoying high occupancies of 80% to 90% and should see double-digit FY08E RevPAU growth of 11% to 38% due to strong economic growth and FDI flows, which support demand for mid-term accommodation against a backdrop of tight hotel room supply and rising rents for rental properties.
– AUM target of S$2b by end-2008 appears achievable ¨C Its portfolio has grown 47% from S$856m since its listing in Mar 2006 to S$1.26b as at end-Sep 2007 through acquisition of third party and sponsor assets. A potential S$500m worth of properties from Ascott Group could be injected before end-2008.
– Key mid-term risk ¨C We estimate 48% of revenues are denominated in USD in FY08E and FY09E. A structural mid-term US$ decline can translate to lower DPU. Our estimates suggest that a further 1% fall in US$ from our base case will lower FY08E and FY09E DPU by 1.4% and 1.5%, respectively.