• Top-up of SGD45m divestment gains
• RevPAU improved 61% YoY in 2H21
• US, UK and Australia registered the strongest growth
Results beat expectations on top-up distribution of SGD45m – Ascott Residence Trust’s (ART) 2H21
results beat expectations. Revenue rose 29.7% YoY to SGD209.4m while gross profit increased 49.4% YoY to SGD91.2m in 2H21, supported by higher contributions from its existing portfolio and additional contributions from the acquisition of student accommodation assets in the US and rental housing properties in Japan. ART distributed a one-off partial divestment gain of SGD45m to mitigate the impact of Covid-19 and income loss from divested assets. As such, 2H21 DPU came in at 2.27 S cents (+14.1% YoY). On a full-year basis, FY21 DPU grew 42.6% YoY to 4.32 S cents or 105% of our full-year forecast, above our expectations.
Sixth consecutive quarter of RevPAU recovery – ART’s portfolio RevPAU improved 24% QoQ to SGD87 in 4Q21, on higher occupancy (from ~50% to ~60%) and average daily rate (ADR). For 2H21, RevPAU improved 61% YoY to SGD79. US, UK, Japan and Australia led the recovery in RevPAU in 2H21 while RevPAU for China (impacted by movement restrictions in some provinces), Singapore (due to the opening of lyf one-north Singapore which has a lower room rate,) and Vietnam (lockdown measures in 3Q21) declined. As travel restrictions eased gradually, albeit some temporary restrictions in Dec 2021 due to Omicron, we saw stronger demand from both corporate and leisure guests in 2H21.
Increasing asset allocation in stable income to 25- 30% to offer stability – In FY21, ART made a total investment of SGD780m in 8 student accommodations (SA) in the US and 3 rental housing properties in Japan. Asset allocation to stable income (i.e. rental housing and student accommodation properties) had subsequently increased from 5% in FY20 to 16% in FY21. To offer income stability and tap on the growth
opportunities in the SA sector, management revised its medium-term target allocation in stable income from its earlier guidance of 15-20% to 25-30% over the next 3-5 years. We keep our fair value estimate at SGD1.22.
ESG Updates
Ascott Residence Trust’s (ART) ESG rating was upgraded in Jan 2022, mainly driven by an increase in the proportion of green-certified properties and evidence of audits on ethical standards. However, research indicated concerns over ART’s lack of strong talent management initiatives such as extensive trainings programs and a formal grievance mechanism for employees.. BUY. (Chu Peng)