Upcoming AGM of Ascendas: 3rd of July. Ascendas Hospitality trust: Ascending to greater heights?

Upcoming AGM of Ascendas: 3rd of July. Ascendas Hospitality trust: Ascending to greater heights?



This column is written by @calvinwee
-Calvin is a fundamental analyst at heart and an ardent disciple of value investing. He relishes the process of searching for undervalued stocks and enjoys collecting dividends from his stocks.

The AGM of Ascendas Hospitality trust is arranged on 3rd of July. Here is a quick overview on Ascendas Hospitality trust’s business and financial position.

Brief Background:
Ascendas Hospitality Trust (A-HTRUST)’s portfolio comprises of 11 hotels with over 4,000 rooms geographically diversified across key cities in Australia, China, Japan and Singapore.
The hotels are under two main rent structures, being master lease and management contract arrangements. It’s hotels under the management contract arrangements are managed by established operators such as Accor, Marriot and Park Hotel. With a diversified hotel portfolio, A-HTRUST is well positioned to cater to catering to different customer segments from economy to upscale and short-term to long-term stay.

Performance Summary:

Despite the negative economic sentiments in FY16/17, A-HTRUST delivered a commendable performance due to the showing of its hotels in the stronger markets such as Australia and Japan lifted the overall performance of the portfolio. As a result, gross revenue grew by 4,3% yoy and net property increased by 9.1% yoy, respectively. It should be noted that its DPS grew by 5% yoy despite a one-off distribution of $2.0 million in FY15/16, being a portion of proceeds from the sale of the hotel in Cairns. If we exclude the one-off distribution, DPS growth in FY16/17 would have been 8.4% yoy.

In FY16/17, management took prudent steps to reduce its financing costs from 3.4% to 3.2%. by refinancing $115 million of its borrowings. As at 31 March 2017, A-HTRUST’s total borrowing amounted to $555.2 million, with gearing at 32.2%, a relatively conservative percentage.

Financial highlights

The main bulk of A-HTRUST’s $224.4 million revenue comes from Australia, accounting for 68.8% of the total revenue in FY16/17. Revenue for FY16/17 grew by $9.3 million or 4.3% yoy. However, as A-HTRUST has assets in several countries, the revenue growth was partially boosted by favourable currency movements as JPY and AUD strengthened against SGD by 2.1% and 10.7%, respectively yoy. In line with the higher revenue, NPI for FY16/17 increased by $8.3 million or 9.1% yoy. Accordingly, DPS for FY16/17 increased marginally by 4.9% yoy. NPI and DPS has been improving steadily since 2013, reflecting prudent and effective management.

As at 31 March 2017, the portfolio valuation increased by 6.5% yoy to was $1.62billion while NAV per stapled security grew by 7.0% to 92 cents, the highest since its listing in July 2012.

Key takeaways
When evaluating A-HTRUST, it’s of the utmost importance to understand the economic and hotel outlook in Australia since its assets in Australia account for close to 70% of its totalrevenue as mentioned previously. The results from the Australian hotels were a mixed bag. Overall, it posted positive results but the poor showing from the hotels in Brisbane, Paramatta and North Ryde due to oversupply dampened the stellar results from the hotels in Sydney city centre and Melbourne. Overall, the outlook of Sydney remains strong with a higher occupancy level from the boost from the newly opened International Convention Centre Sydney and the Barangaroo urban renewal project. Melbourne is nearing the end of its stellar growth and moving forward, its growth is expected to moderate slightly as the development pipeline continues to build, with a number of large mixed use developments and standalone hotel projects. The hotels in Brisbane are likely to continue operating in a challenging environment with due to intensified competition from new room supply in these markets.

Moving into FY17/18, A-HTRUST will likely to continue delivered sustained dividends for its shareholders. Bearing in mind the headwinds that A-HTRUST will face in some of the markets, it is unlikely that it will outperform expectations.

Disclaimer
All research reports are of the analysts’ personal opinions and do not in any way reflect InvestingNote’s official opinion. InvestingNote does not issue a buy or sell recommendation on any security, and any research paper published by The Signal Blog is purely for informative purposes. This research is based on current public information, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual InvestingNote users. InvestingNote users should consider whether the information in this research is reliable, and suitable for their particular circumstances and, if appropriate, seek professional advice. The price and value of investments referred to in this research and the investment income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

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