ART distributable income for Q4 up 54% to $12.8m

ASCOTT Residence Trust (ART), which owns serviced apartments, yesterday announced distributable income of $12.8 million for the fourth quarter, boosted by new acquisitions and strong operating performance.

The distribution for the three months ended Dec 31, 2007 is 16 per cent better than its forecast and 54 per cent up year-on-year.

Distribution per unit for the quarter was 2.12 cents, 16 per cent higher than projected and a rise of 28 per cent year-on-year.

The quarter’s results brought full-year distributable income to $45.1 million, 12 per cent better than forecast.

Full-year distribution is 7.7 cents per unit, 9 per cent higher than projected. Revenue for the quarter came to $42.9 million, beating ART’s projection by 10 per cent and 47 per cent higher year-on-year. Full- year revenue was $154.8 million, beating projection by 7 per cent.

Revenue was higher on new acquisitions and greater income stability through increased diversification, especially into rental housing which now makes up 22 per cent of its portfolio.

ART recognised a revaluation surplus of $136.9 million (net of tax and minority interest). The group’s net asset value per unit as at Dec 31, 2007, was $1.60, up from $1.33 a year ago.

ART is a Pan-Asian serviced residence real estate investment trust managed by Ascott Residence Trust Management Limited (ARTML), a subsidiary of The Ascott Group.

It was launched in March 2006 with an initial portfolio of 12 properties across Asia. Upon the completion of its latest acquisition in Perth, its portfolio will expand to 37 properties in 11 cities, valued at $1.52 billion.

Lim Jit Poh, chairman of ARTML, said: ‘We will continue to pursue organic and acquisition growth to deliver growing and stable income to unit-holders. We remain focused on achieving our target total asset portfolio of $2 billion by end-2008.’

The trust said that operating performance this year is expected to grow.

ART yesterday closed at $1.18, up one cent.

Upgrading to Buy on valuation

Results benefited from recent acquisitions. Ascott Residence Trust (ART) reported a good set of 3Q07 results with both revenue and distributable income higher than its own forecast. Revenue came in at S$42.3m (9% above forecast) and distributable income came in at S$12m (9% higher than forecast). The better performance was due to out-performance in Singapore, Philippines and Vietnam. All 3 had better-than-expected revenue per available unit (RevPau). DPU was 1.99 cents, better than our estimate of 1.70 cents. In light of the good performance, we are adjusting our FY07 and FY08 forecast from 6.8 cents and 6.9 cents to 7.65 cents and 8.01 cents, respectively.

Star performer was Vietnam. In 3Q07, China was most important in terms of revenue contribution (24% of group revenue). However at the gross profit level, it only provided 23% of group profit, this is well below the 27% contribution by Vietnam. More importantly, Vietnam was the most profitable segment, providing a gross margin of 61%, with Singapore in second place at 54% followed by Japan at 45%. China is well behind at only 42%.

Acquisition to continue to drive earnings. Year to date, ART has acquired S$144m worth of properties, and this has boosted its portfolio from 12 properties (at IPO) to the current 18 properties. Presently ART’s asset value stands at S$1.26b but management has guided a size of S$2.0b by end 2008. This implies that ART will be buying S$0.74b worth of assets over the next 12 months. Currently, ART has a gearing of 29%, and with a capacity to gear up to 60%, ART has a debt capacity of S$620m. This means that the bulk of the acquisitions that ART will do is likely to be “free” accretion to unit-holders as it is likely to be debt funded. We anticipate an equity cash call only in late 1H08 or 2H08.

Upgrade to BUY on valuation. Finally since our last report, ART has corrected from S$1.85 to last traded price of S$1.58. More importantly, the price correction means that ART’s price to book ratio has come down from 1.34x (April) to the present 1.14x. In our opinion this does not reflect the expected strong acquisition growth that management has guided. We continue to like ART and our previous HOLD rating was purely on valuation grounds. In light of the recent correction, we are upgrading our rating on ART from HOLD to BUY and maintaining our fair value of S$1.94.

ART Q3 distribution up 84% to $12m

ASCOTT Residence Trust (ART), the first pan-Asian serviced residence real estate investment trust (Reit), achieved an 84 per cent year-on-year growth in unitholders’ distribution to $12 million for the third quarter ended Sept 30. The results, which also exceeded its own estimate by 9 per cent, were underpinned by strong operating performance and accretive acquisitions.

This gave a distribution per unit of 1.99 cents for the quarter, which is 39 per cent higher than for the corresponding period last year and 9 per cent better than forecast.

What stood out was that revenues per available unit for its serviced residences in the Philippines and Singapore were 32 per cent and 22 per cent better than forecast in the third quarter.

‘As part of the overall growth strategy, ART will continue to acquire quality serviced residences and rental housing properties to achieve a portfolio value of $2 billion by end-2008,’ said Lim Jit Poh, chairman of Ascott Residence Trust Management Ltd (ARTML), the manager of the trust.

ART has a geographically diversified portfolio of 18 properties in 10 cities across seven countries including Australia, China, Indonesia, Japan, the Philippines, Singapore and Vietnam. Its portfolio value is currently $1.2 billion, comprising of 2,952 serviced residence units.

‘Demand for serviced residences is expected to remain strong and we are confident of delivering the forecast distribution per unit of 7.27 cents for the year,’ ARTML’s chief executive Chong Kee Hiong said.