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Technical Analysis

Price bounced off Fibonacci retracement level at $0.9576 (38.2%) beautifully in the last two sessions. Interestingly the price action saw some form of panic selling earlier last week, breaking below the 200 days MA which in my opinion is not justified. The selling was probably caused by Singapore entering phase 2 (Heightened alert) announced on the 14th of May. It has attempted a rebound following that day but to no avail.

MACD is attempting a positive crossover from below the baseline which is bullish. The current level of the MACD was seen three times since the covid crisis happened and for all three of them, lows were established and rebounded subsequently.

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RSI is currently attempting to break out of the last downtrend. Interesting observation from the last three lows established was the fact that the RSI first hit the low before the MACD though both indicators are laggard indicators.

Price should rebound back above $1 in the near term and test the resistance at $1.0459 (50% retracement level) and the next level to watch is $1.1342 (61.8% retracement level).

Market and fundamental analysis

In my opinion, the known-known about the current situation is that we will most probably exit phase 2 in the coming month, with experts from NUS commenting that the government is doing a good job in containing the lastest spread with the phase 2 heightened alert. This piece of information is backed by the number of community cases remaining constant, or even reducing after the implementation of phase 2 heightened alert.

Moreover, ART’s portfolio spans over 39 cities in 15 countries which greatly reduces asset concentration risk.

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Most probably, we had seen the worst of the pandemic’s impact on ART in 2020. With the global vaccination exercise by governments in progress, we should be able to see a recovery in the travel and hospitality sector. I am not expecting the recovery to be instantaneous and most probably, it will be the last sector to actually come back.

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Global savings rate since the crisis started, has seen a tremendous increase (refer to table below). There is a growing pent-up demand for travel, and the longer global travel is being held up, the more this pent-up demand will grow. Personally, i have booked flights to tokyo for the entire family, scheduled in November 2021, not knowing will I be able to fly when it comes. But i want to be back traveling as soon as global traveling is allowed.

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Global Household savings rate 2021
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One thing to take note of is that Asia Pacific region (which happens to see various new waves of infection) makes up of more than 70% of its total gross profit. Therefore, with the recent covid resurgence in this region, the recovery may be uneven. But if i have a time frame of 2-3 years, it might be a good time to accumulate with prices trading at a discount currently.

Current PB at 0.8x and PB of industry at 0.9x

Debt to equity ratio has reduced from 68.1% to 61.8% over the past 5 years.

Price is still 42.71% away from pre-covid level at $1.42.

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Current dividend yield is 3.05%, which should increase once we return to pre-covid level of operations. Assuming at $1.42, the dividend yield stays at 3% and if i have bought the shares at $1, my yield then will be 4.25% based on my entry price of $1.

Temasek holds a 40.47% stake in the company.

Not forgetting, Ascott Residence Trust (ART) is the largest hospitality trust in Asia Pacific with an asset value of S$7.2 billion as at 31 December 2020.

I would buy for both a trading buy and as and investment with a time horizon of 2-3 years as well.

Some assumptions have been made in the above writings. As of writing, Ascott REIT last closing price on the 30th of May is $0.995.

Good luck!

Disclaimer: Currently, I do hold shares of ART.