MAYBANK has raised its target price for Ascott Residence Trust (ART) : HMN 0% to S$1.40, from S$1.30, on expectations of strong revenue recovery in the second half of the year. It has a ‘buy’ call on the counter.

The trust last week posted a 14 per cent rise in distribution per stapled security (DPS) to S$0.0233 for H1 ended June. Excluding one-offs, adjusted DPS had jumped 120 per cent, noted analyst Chua Su Tye in a Monday (Aug 1) report.

Its properties in France and the UK have outperformed pre-pandemic levels, Chua highlighted, adding that management sees room for stronger revenue per available unit (RevPAU) recoveries in Japan and China in H2.

The research house is now assuming 40 per cent growth in RevPAU, as opposed to 25 per cent year-on-year. It also expects a stronger performance in H2, as compared to the first half of the year. In line with this, Chua raised his forecasts by 7-8 per cent.

“We like ART’s diversified portfolio, concentrated longer-stay assets, strong balance sheet, and S$300 million in residual divestment gains to support capital distributions amid an uneven DPU recovery,” he said.

The trust’s acquisitions have also lifted contributions from stable income sources to 68 per cent of H1 gross profit, as opposed to 64 per cent in H2 FY2021, Chua noted. Rental housing and student accommodation assets added from last year saw occupancy rates that exceeded 95 per cent, with 3 of the 7 US properties fully-occupied. (*see amendment note)

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

ART’s gearing is stable at 37.5 per cent, with the proportion of fixed-rate debt remaining high at 79 per cent. Maybank expects that a 50 basis point increase in base rate could lower ART’s DPU by less than 2 per cent.

Chua added: “We see a S$1.8 billion debt headroom supporting acquisitions, with the new CEO looking to leverage on ART’s strong financial fundamentals to drive growth on its more resilient, long-stay assets under management.”

ART was trading flat at S$1.17 on Monday as of 10.48am.

*Amendment note: Maybank had previously stated the incorrect number of US properties under ART. It has since amended its report.