Ascott Residence Trust (ART) is the largest hospitality trust in Asia Pacific with an asset value of S$7.7bn as at 31 December 2021. ART’s international portfolio comprises 95 properties with more than 17,000 units in 44 cities across 15 countries in Asia Pacific, Europe and the United States of America as at 31 March 2022. ART’s properties are mostly operated under the Ascott The Residence, Somerset, Quest and Citadines brands. They are mainly located in key gateway cities such as Barcelona, Berlin, Brussels, Hanoi, Ho Chi Minh City, Jakarta, Kuala Lumpur, London, Manila, Melbourne, Munich, New York, Paris, Perth, Seoul, Singapore, Sydney and Tokyo. ART is managed by Ascott Residence Trust Management Limited (as manager of Ascott Reit) and Ascott Business Trust Management Pte. Ltd. (as trustee-manager of Ascott BT), both of which are wholly-owned subsidiaries of Singapore-listed CapitaLand Investment Limited (CLI SP).
UNWTO/IATA sees growing occupancy rates across Asia, Europe, and the Americas. According to the UNWTO Tourism Recovery Tracker, key ART markets such as Asia Pacific, Europe, and the Americas have seen recovering occupancy rates vis-a-vis pre-pandemic levels in 2019. In the Asia Pacific region, June occupancy levels have grown to 56% vs Jan’s 43%. Meanwhile, other key markets in Europe and Americas have seen stronger and more robust occupancy rates likely due to the summer vacations. Europe’s Jun occupancy rates were 75% (Jan: 34%) of 2019 levels, while the Americas’ stood at 69% (Jan: 47%). Notwithstanding the occupancy rates, we note that the same tracker observes the Asia Pacific region further picking up the slack with hotel bookings currently at -19% (Jan: -78%) vs 2019 levels, while Europe and the Americas are substantially higher, albeit still stronger booking rates of -59% (Jan: -82%) and -59% (Jan: -72%), respectively.
Green shoots of recovery already seen in 1Q22. ART reported strengthening portfolio RevPAU of S$67 (+22% YoY) or about 50% of 1Q19 levels, with increases in both average daily rates and occupancy. Additionally, management shared that forward bookings had indicated sustained robust demand from leisure and corporate travel segments combined with growth in the MICE industry. Leisure demand was particularly boosted by revenge travelling into key markets such as Australia, Japan, Singapore, UK, and the US.
Trading below pre-pandemic valuations even as recovery likely picked up. The Street currently has 6/3/1 BUY/HOLD/SELL ratings and an average TP of S$1.23. Based on consensus estimates, FY22F gross revenue and NPI should surge 32.5%/55.8% YoY, while FY22F DPU growth should jump 20.6% YoY higher to S$0.052 apiece. While ART’s valuations have improved significantly since the pandemic struck, it is still significantly lower than the levels it was trading at prior. As the tourism recovery takes hold, we believe that there is upside risk that ART could outperform the Street’s forecasts and revert to its pre-pandemic valuations. At current prices, ART would trade at a still fairly attractive 4.5%/5.4% FY22F/23F yield
