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Ascott Residence Trust - Potential Upside After Merger With Ascendas Hospitality Trust

Key Highlights:

  • Ascott ResidenceTrust (SGX: A68U)'s 3Q19 DPU grew 5%

  • The annualised yield and price to book ratio are 5.1% and 1.12 respectively

1. Dividends

Revenue dropped 2% to $132.4m. The drop in income was mainly due to divestment of Ascott Raffles Place Singapore and weaker contributions from management contracts in China, Japan and US. However, DPU grew due to the one-off partial distribution from the divestment of Ascott Raffles Place.

The annualised yield is 5.1%.

2. Portfolio

The overall portfolio RevPAU dropped 2% to $155, the trust saw weaker demand in competitive countries such as China, Us and Japan. The portfolio leverage is currently at 33%. The interest cost is 2.1%, 88% of its loans are on a fixed rate.

It is currently trading at a price to book ratio of 1.12.

3. Growth Catalyst

Moving forward, if the merger of Ascott Residence Trust and Ascendas Hospitality Trust is successful, the combined portfolio of $7.6b will form the largest hospitality trust in Asia-Pacific. The combined trust is expected to start trading on 2 Jan 2020.

Post-merger, Ascott Residence Trust will have greater access to growth opportunities, through new development and potential conversion projects. Besides, the merger will also strengthen its financial ability for future fundraising activity.

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