Stock Investing: Ascott REIT’s 3Q 2015 Report

Below is a press release from The Ascott Limited, a wholly owned serviced residence unit of CapitaLand, one of the companies which I deeply admire. Ascott has been expanding aggressively lately in the South-east Asia region on the back of the soon-to-be-established ASEAN Economic Community.

Ascott Residence Trust’s (Ascott Reit) revenue for 3Q 2015 rose 21% over 3Q 2014 to reach S$113.2 million. This came on the back of its acquisitions in 2014 and 2015, as well as stronger operating performance from existing properties. Revenue per available unit (RevPAU) for 3Q 2015 grew 10% to S$141 compared to the same period in 2014. Gross profit increased 13% to S$55.2 million.

Ascott Reit’s 3Q 2015 Unitholders’ distribution of S$32.0 million included a one-off item of approximately S$1.2 million relating to the interest cost incurred on the S$250 million perpetual securities issued in June 2015 for the period prior to utilisation of the proceeds in 3Q 2015 to partially fund Ascott Reit’s acquisitions in Australia and the United States of America. Distribution per unit (DPU) for 3Q 2015 is 2.07 cents. Excluding the one-off item, the adjusted DPU would be 2.15 cents, which is 2% higher than 3Q 2014 DPU of 2.11 cents.

Mr Lim Jit Poh, Ascott Residence Trust Management Limited’s (ARTML) Chairman, said: “We continue to enhance Ascott Reit’s portfolio and optimise Unitholders’ returns through accretive acquisitions as well as active asset and capital management. In 3Q 2015, we completed half a billion dollars worth of acquisitions. We acquired six properties in Australia, Japan and the United States of America, and the remaining stakes in two properties in Japan. With Ascott Reit’s entry into the United States of America, we are seeing maiden contribution from our property in Times Square of New York in this quarter. Recently, we also divested six rental housing properties in the regional cities of Japan for JPY4,475 million (approximately S$52.6 million), which is 13% higher than the last valuation on 30 June 2015. This is in line with our active asset management strategy to unlock the value of properties with limited potential and re-deploy the proceeds in higher yielding assets.”

Mr Lim said: “We will actively seek accretive acquisitions in markets such as Australia, Japan, Europe and the United States of America. Ascott Reit is the largest hospitality REIT in Singapore with an asset value of S$4.7 billion. With the expected completion of our acquisition of the Cairnhill development in Singapore in 2017, Ascott Reit’s asset size will grow to S$5.1 billion; putting us well on track to achieve our target asset value of S$6.0 billion by 2017.”

Mr Ronald Tay, ARTML’s Chief Executive Officer, said: “In 3Q 2015, several of our markets achieved strong operating performance. Japan, Belgium and Indonesia showed double-digit growth in RevPAU. In Japan, greater demand for our serviced residences from corporate and leisure travellers pushed RevPAU up by 18%2 . RevPAU for Belgium and Indonesia rose 15%2 and 14%2 respectively due to stronger corporate demand.”

Mr Tay added: “Our asset enhancement initiatives are driving organic growth and our refurbished properties are getting recognition. RevPAU for Vietnam was up 7%2 as a result of increased demand for the refurbished apartments at Somerset Ho Chi Minh City. Citadines Ramblas Barcelona and Citadines Sainte-Catherine Brussels also saw higher demand for their refurbished apartments. They were recently named Spain’s and Belgium’s Leading Serviced Apartments at the World Travel Awards while Citadines Suites Louvre Paris was named France’s Leading Serviced Apartments. Ascott Makati and Citadines Barbican London will commence refurbishment in 4Q 2015 and 1Q 2016 respectively. We will continue to invest in upgrading our properties to enhance guest experience and maximise Unitholders’ returns.”

Mr Tay said: “Ascott Reit’s track record in delivering stable and growing distributions to Unitholders has been recognised by investors and institutions. We are very honoured to be awarded the Best REIT (Asia) for 2015 by World Finance magazine. The award is a vote of confidence by investors as we were nominated by readers and assessed on our growth, income stability and global presence. This is the second time Ascott Reit is recognised by World Finance having won Best Investment Fund Manager (South Eastern Asia) at its Real Estate Awards in 2011. Since our listing on the Singapore Stock Exchange in 2006, Ascott Reit has grown to become the leading global serviced residence REIT. Our acquisitions this year have increased Ascott Reit’s portfolio by 1,279 units and we now have 11,392 units in 38 cities across 14 countries.”